Bill Text Versions

Current Version - as introduced

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36.3036.3137.137.237.337.437.537.637.737.837.937.1037.1137.1237.1337.1437.1537.1637.1737.1837.1937.2037.2137.2237.2337.2437.2537.2637.2737.2837.2937.3037.3137.3237.3337.3437.3537.3638.138.238.338.438.538.638.738.838.938.1038.1138.1238.1338.1438.1538.1638.1738.1838.1938.2038.2138.2238.2338.2438.2538.2638.2738.2838.2939.139.239.339.439.539.639.739.839.939.1039.1139.1239.1339.1439.1539.1639.1739.1839.1939.2039.2139.2239.2339.2439.2539.2639.2739.2839.2939.3039.3139.3239.3340.140.240.340.440.540.640.740.840.940.1040.1140.1240.1340.1440.1540.1640.1740.1840.1940.2040.2140.2240.2340.2440.2540.2640.2740.2840.2940.3040.3140.3241.141.241.341.441.541.641.741.841.941.1041.1141.1241.1341.1441.1541.1641.1741.1841.1941.2041.2141.2241.2341.2441.2541.2641.2741.2841.2941.3041.3141.3241.3342.142.242.342.442.542.642.742.842.942.1042.1142.1242.1342.1442.1542.1642.1742.1842.1942.2042.2142.2242.2342.2442.2542.2642.2742.2842.2942.3042.3143.143.243.343.443.543.643.743.843.943.1043.1143.1243.1343.1443.1543.1643.1743.1843.1943.2043.2143.2243.2343.2443.2543.2643.2743.2843.2943.3044.144.244.344.444.544.644.744.844.944.1044.1144.1244.1344.1444.1544.1644.1744.1844.1944.2044.2144.2244.2344.2444.2544.2644.2744.2844.2944.3044.3145.145.245.345.445.545.645.745.845.945.1045.1145.1245.1345.1445.1545.1645.1745.1845.1945.2045.2145.2245.2345.2445.2545.2645.2745.2845.2945.3045.3145.3245.3346.146.246.346.446.546.646.746.846.946.1046.1146.1246.1346.1446.1546.1646.1746.1846.1946.2046.2146.2246.2346.2446.2546.2646.2746.2846.2946.3046.3146.3247.147.247.347.447.547.647.747.847.947.1047.1147.1247.1347.1447.1547.1647.1747.1847.1947.2047.2147.2247.2347.2447.2547.2647.2747.2847.2947.3047.3147.3248.148.248.348.448.548.648.748.848.948.1048.1148.1248.1348.1448.1548.1648.1748.1848.1948.2048.2148.2248.2348.2448.2548.2648.2748.2848.2948.3048.3148.3249.149.249.349.449.549.649.749.849.949.1049.1149.1249.1349.1449.1549.1649.1749.1849.1949.2049.2149.2249.2349.2449.2549.2649.2749.2849.2949.3049.3150.150.250.350.450.550.650.750.850.950.1050.1150.1250.1350.1450.1550.1650.1750.1850.1950.2050.2150.2250.2350.2450.2550.2650.2750.2850.2950.3050.3150.3251.151.251.351.451.551.651.751.851.951.1051.1151.1251.1351.1451.1551.1651.1751.1851.1951.2051.2151.2251.2351.2451.2551.2651.2751.2851.2951.3051.3151.3251.3352.152.252.352.452.552.652.752.852.952.1052.1152.1252.1352.1452.1552.1652.1752.1852.1952.2052.2152.2252.2352.2452.2552.2652.2752.2853.153.253.353.453.553.653.753.853.953.1053.1153.1253.1353.1453.1553.1653.1753.1853.1953.2053.2153.2253.2353.2453.2553.2653.2753.2853.2953.3053.3153.3254.154.254.354.454.554.654.754.854.954.1054.1154.1254.1354.1454.1554.1654.1754.1854.1954.2054.2154.2254.2354.2454.2554.2654.2754.2854.2954.3054.3154.3255.155.255.355.455.555.655.755.855.955.1055.1155.1255.1355.1455.1555.1655.1755.1855.1955.2055.2155.2255.2355.2455.2555.2655.2755.2855.2955.3055.3155.3255.3355.3456.156.256.356.456.556.656.756.856.956.1056.1156.1256.1356.1456.1556.1656.1756.1856.1956.2056.2156.2256.2356.2456.2556.2656.2756.2856.2956.3056.3156.3257.157.257.357.457.557.657.757.857.957.1057.1157.1257.1357.1457.1557.1657.1757.1857.1957.2057.2157.2257.2357.2457.2557.2657.2757.2857.2957.3057.3157.3257.3357.3458.158.258.358.458.558.658.758.858.958.1058.1158.1258.1358.1458.1558.1658.1758.1858.1958.2058.2158.2258.2358.2458.2558.2658.2758.2858.2958.3058.3158.3259.159.259.359.459.559.659.759.859.959.1059.1159.1259.1359.1459.1559.1659.1759.1859.1959.2059.2159.2259.2359.2459.2559.2659.2759.2859.2959.3059.3160.160.260.360.460.560.660.760.860.960.1060.1160.1260.1360.1460.1560.1660.1760.1860.1960.2060.2160.2260.2360.2460.2560.2660.2760.2860.2960.3060.3160.3260.3361.161.261.361.461.561.661.761.861.961.1061.1161.1261.1361.1461.1561.1661.1761.1861.1961.2061.2161.2261.2361.2461.2561.2661.2761.2861.2961.3061.3162.162.262.362.462.562.662.762.862.962.1062.1162.1262.1362.1462.1562.1662.1762.1862.1962.2062.2162.2262.2362.2462.2562.2662.2762.2862.2962.3062.3162.3263.163.263.363.463.563.663.763.863.963.1063.1163.1263.1363.1463.1563.1663.1763.1863.1963.2063.2163.2263.2363.2463.2563.2663.2763.2863.2963.3063.3163.3264.164.264.364.464.564.664.764.864.964.1064.1164.1264.1364.1464.1564.1664.1764.1864.1964.2064.2164.2264.2364.2464.2564.2664.2764.2864.2964.3064.3164.3264.3364.3465.165.265.365.465.565.665.765.865.965.1065.1165.1265.1365.1465.1565.1665.1765.1865.1965.2065.2165.2265.2365.2465.2565.2665.2765.2865.2965.3065.3165.3265.3366.166.266.366.466.566.666.766.866.966.1066.1166.1266.1366.1466.1566.1666.1766.1866.1966.2066.2166.2266.2366.2466.2566.2666.2766.2866.2966.3066.3166.3266.3366.3467.167.267.367.467.567.667.767.867.967.1067.1167.1267.1367.1467.1567.1667.1767.1867.1967.2067.2167.2267.2367.2467.2567.2667.2767.2867.2967.3067.3167.3267.3368.168.268.368.468.568.668.768.868.968.1068.1168.1268.1368.1468.1568.1668.1768.1868.1968.2068.2168.2268.2368.2468.2568.2668.2768.2868.2968.3068.3168.3269.169.269.369.469.569.669.769.869.969.1069.1169.1269.1369.1469.1569.1669.1769.1869.1969.2069.2169.2269.2369.2469.2569.2669.2769.2869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ARTICLE 1

TAX RELIEF FOR MINNESOTA FAMILIES

Section 1.

Subdivision 1.

Credit allowed.

(a) An individual who is a resident of Minnesota is allowed a credit against the tax imposed by this chapter equal to a percentage of earned income. To receive a credit, a taxpayer must be eligible for a credit under section 32 of the Internal Revenue Code, exceptnew text begin:new text end

new text begin(1)new text end that a taxpayer with no qualifying children who has attained the age of 21, but not attained age 65 before the close of the taxable year and is otherwise eligible for a credit under section 32 of the Internal Revenue Code may also receive a creditdeleted text begin.deleted text endnew text begin; andnew text end

new text begin(2) a taxpayer who is otherwise eligible for a credit under section 32 of the Internal Revenue Code remains eligible for this credit even if the taxpayer's earned income or adjusted gross income exceeds the income limitation under section 32 of the Internal Revenue Code.new text end

(b) For individuals with no qualifying children, the credit equals deleted text begin2.10deleted text endnew text begin threenew text end percent of the first deleted text begin$6,180deleted text endnew text begin $6,680new text end of earned income. The credit is reduced by deleted text begin2.01deleted text endnew text begin threenew text end percent of earned income or adjusted gross income, whichever is greater, in excess of deleted text begin$8,130deleted text endnew text begin $12,340new text end, but in no case is the credit less than zero.

(c) For individuals with one qualifying child, the credit equals deleted text begin9.35deleted text endnew text begin 12.71new text end percent of the first deleted text begin$11,120deleted text endnew text begin $8,590new text end of earned income. The credit is reduced by deleted text begin6.02deleted text endnew text begin 5.20new text end percent of earned income or adjusted gross income, whichever is greater, in excess of deleted text begin$21,190deleted text endnew text begin $22,220new text end, but in no case is the credit less than zero.

new text begin(e) For individuals with three or more qualifying children, the credit equals 15.78 percent of the first $14,870 of earned income. The credit is reduced by 9.07 percent of earned income or adjusted gross income, whichever is greater, in excess of $26,360, but in no case is the credit less than zero.new text end

deleted text begin(e)deleted text endnew text begin (f)new text end For a part-year resident, the credit must be allocated based on the percentage calculated under section 290.06, subdivision 2c, paragraph (e).

deleted text begin(f)deleted text endnew text begin (g)new text end For a person who was a resident for the entire tax year and has earned income not subject to tax under this chapter, including income excluded under section 290.0132, subdivision 10, the credit must be allocated based on the ratio of federal adjusted gross income reduced by the earned income not subject to tax under this chapter over federal adjusted gross income. For purposes of this paragraph, the following clauses are not considered "earned income not subject to tax under this chapter":

(2) the exclusion of combat pay under section 112 of the Internal Revenue Code; and

(3) income derived from an Indian reservation by an enrolled member of the reservation while living on the reservation.

deleted text begin(g)deleted text endnew text begin (h)new text end For tax years beginning after December 31, deleted text begin2013deleted text endnew text begin 2018new text end, the deleted text begin$8,130deleted text endnew text begin $12,340new text end in paragraph (b), the deleted text begin$21,190deleted text endnew text begin $22,220new text end in paragraph (c), deleted text beginanddeleted text end the deleted text begin$25,130deleted text endnew text begin $26,360new text end in paragraph (d)new text begin, and the $26,360 in paragraph (e)new text end, after being adjusted for inflation under subdivision 7, are each increased by deleted text begin$5,000deleted text endnew text begin $5,570new text end for married taxpayers filing joint returns. deleted text beginFor tax years beginning after December 31, 2013, the commissioner shall annually adjust the $5,000 by the percentage determined pursuant to the provisions of section 1(f) of the Internal Revenue Code, except that in section 1(f)(3)(B), the word "2008" shall be substituted for the word "1992." For 2014, the commissioner shall then determine the percent change from the 12 months ending on August 31, 2008, to the 12 months ending on August 31, 2013, and in each subsequent year, from the 12 months ending on August 31, 2008, to the 12 months ending on August 31 of the year preceding the taxable year. The earned income thresholds as adjusted for inflation must be rounded to the nearest $10. If the amount ends in $5, the amount is rounded up to the nearest $10. The determination of the commissioner under this subdivision is not a rule under the Administrative Procedure Act.deleted text end

deleted text begin(h)deleted text endnew text begin (i)new text end The commissioner shall construct tables showing the amount of the credit at various income levels and make them available to taxpayers. The tables shall follow the schedule contained in this subdivision, except that the commissioner may graduate the transition between income brackets.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

Sec. 2.

Subd. 7.

Inflation adjustment.

The earned income amounts used to calculate the credit and the income thresholds at which the maximum credit begins to be reduced in subdivision 1new text begin, and the additional threshold amount for married taxpayers filing joint returns,new text end must be adjusted for inflation. The commissioner shall adjust by the percentage determined pursuant to the provisions of section 1(f) of the Internal Revenue Codenew text begin, as amended through December 31, 2016new text end, except that in section 1(f)(3)(B) the word deleted text begin"2013"deleted text endnew text begin "2017"new text end shall be substituted for the word "1992." For deleted text begin2015deleted text endnew text begin 2019new text end, the commissioner shall then determine the percent change from the 12 months ending on August 31, deleted text begin2013deleted text endnew text begin 2017new text end, to the 12 months ending on August 31, deleted text begin2014deleted text endnew text begin 2018new text end, and in each subsequent year, from the 12 months ending on August 31, deleted text begin2013deleted text endnew text begin2017new text end, to the 12 months ending on August 31 of the year preceding the taxable year. The earned income thresholds as adjusted for inflation must be rounded to the nearest $10 amount. If the amount ends in $5, the amount is rounded up to the nearest $10 amount. The determination of the commissioner under this subdivision is not a rule under the Administrative Procedure Act.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

Sec. 3.

new text begin[290.0687] PERSONAL AND DEPENDENT CREDIT.new text end

new text beginSubdivision 1.new text end

new text beginCredit allowed.new text end

new text begin(a) A resident or part-year resident taxpayer is allowed a credit against the income tax due under section 290.06, subdivision 2c, in an amount equal to the sum of:new text end

new text begin(1) $60, or in the case of a married couple filing a joint return $120; plusnew text end

new text begin(2) $60 multiplied by the number of dependents of the taxpayer, as defined under sections 151 and 152 of the Internal Revenue Code.new text end

new text begin(b) The credit is not allowed to an individual who is eligible to be claimed as a dependent, as defined in sections 151 and 152 of the Internal Revenue Code. The credit may not exceed the liability for tax under this chapter.new text end

new text beginSubd. 2.new text end

new text beginCredit amount.new text end

new text begin(a) The credit under subdivision 1 is reduced in the case of married individuals filing a joint return by one percent for each $1,000, or fraction thereof, above the threshold, and for all other taxpayers by two percent for each $1,000, or fraction thereof, above the threshold amount.new text end

new text begin(b) The threshold amounts are:new text end

new text begin(1) $180,000 of federal adjusted gross income for married individuals filing a joint return; andnew text end

new text begin(2) $90,000 of federal adjusted gross income for all other taxpayers.new text end

new text begin(c) The thresholds must be increased by an amount equal to:new text end

new text begin(2) the cost-of-living adjustment determined under section 1(f) of the Internal Revenue Code, as amended through December 16, 2016, for the calendar year in which the taxable year begins, by substituting "calendar year 2017" for "calendar year 1992" in subparagraph (B) of section 1(f)(3).new text end

new text begin(d) The determination of the commissioner pursuant to this subdivision shall not be considered a rule and shall not be subject to the Administrative Procedure Act under chapter 14, including section 14.386.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

Sec. 4. new text beginAPPROPRIATION.new text end

new text begin$276,000 in fiscal year 2019 is appropriated from the general fund to the commissioner of revenue to administer section 3. The base for this purpose is $428,000 in fiscal year 2020 and $428,000 in fiscal year 2021.new text end

ARTICLE 2

RESPONSE TO THE 2017 FEDERAL LAW CHANGE

Section 1.

Subd. 5.

Debt.

(a) "Debt" means a legal obligation of a natural person to pay a fixed and certain amount of money, which equals or exceeds $25 and which is due and payable to a claimant agency. The term includes criminal fines imposed under section 609.10 or 609.125, fines imposed for petty misdemeanors as defined in section 609.02, subdivision 4a, and restitution. A debt may arise under a contractual or statutory obligation, a court order, or other legal obligation, but need not have been reduced to judgment.

A debt includes any legal obligation of a current recipient of assistance which is based on overpayment of an assistance grant where that payment is based on a client waiver or an administrative or judicial finding of an intentional program violation; or where the debt is owed to a program wherein the debtor is not a client at the time notification is provided to initiate recovery under this chapter and the debtor is not a current recipient of food support, transitional child care, or transitional medical assistance.

(b) A debt does not include any legal obligation to pay a claimant agency for medical care, including hospitalization if the income of the debtor at the time when the medical care was rendered does not exceed the following amount:

(1) for an unmarried debtor, an income of $12,560 or less;

(2) for a debtor with one dependent, an income of $16,080 or less;

(3) for a debtor with two dependents, an income of $19,020 or less;

(4) for a debtor with three dependents, an income of $21,580 or less;

(5) for a debtor with four dependents, an income of $22,760 or less; and

(6) for a debtor with five or more dependents, an income of $23,730 or less.

For purposes of this paragraph, "debtor" means the individual whose income, together with the income of the individual's spouse, other than a separated spouse, brings the individual within the income provisions of this paragraph. For purposes of this paragraph, a spouse, other than a separated spouse, shall be considered a dependent.

(c) The commissioner shall adjust the income amounts in paragraph (b) by the percentage determined pursuant to the provisions of section 1(f) of the Internal Revenue Code, new text beginas amended through December 16, 2016, new text endexcept that in section 1(f)(3)(B) the word "2014" shall be substituted for the word "1992." For 2016, the commissioner shall then determine the percent change from the 12 months ending on August 31, 2014, to the 12 months ending on August 31, 2015, and in each subsequent year, from the 12 months ending on August 31, 2014, to the 12 months ending on August 31 of the year preceding the taxable year. The determination of the commissioner pursuant to this subdivision shall not be considered a "rule" and shall not be subject to the Administrative Procedure Act contained in chapter 14. The income amount as adjusted must be rounded to the nearest $10 amount. If the amount ends in $5, the amount is rounded up to the nearest $10 amount.

(d) Debt also includes an agreement to pay a MinnesotaCare premium, regardless of the dollar amount of the premium authorized under section 256L.15, subdivision 1a.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

new text beginEFFECTIVE DATE.new text end

Sec. 3.

Subd. 14.

Reporting exempt interest and exempt-interest dividends.

(a) A regulated investment company paying $10 or more in exempt-interest dividends to an individual who is a resident of Minnesota, or any person receiving $10 or more of exempt interest or exempt-interest dividends and paying as nominee to an individual who is a resident of Minnesota, must make a return indicating the amount of the exempt interest or exempt-interest dividends, the name, address, and Social Security number of the recipient, and any other information that the commissioner specifies. The return must be provided to the recipient by February 15 of the year following the year of the payment. The return provided to the recipient must include a clear statement, in the form prescribed by the commissioner, that the exempt interest or exempt-interest dividends must be included in the computation of Minnesota taxable income. By June 1 of each year, the payer must file a copy of the return with the commissioner.

(b) For purposes of this subdivision, the following definitions apply.

(1) "Exempt-interest dividends" mean exempt-interest dividends as defined in section 852(b)(5) of the Internal Revenue Code, but does not include the portion of exempt-interest dividends that are not required to be added to federal deleted text begintaxabledeleted text endnew text begin adjusted grossnew text end income under section 290.0131, subdivision 2, paragraph (b).

(2) "Regulated investment company" means regulated investment company as defined in section 851(a) of the Internal Revenue Code or a fund of the regulated investment company as defined in section 851(g) of the Internal Revenue Code.

(3) "Exempt interest" means income on obligations of any state other than Minnesota, or a political or governmental subdivision, municipality, or governmental agency or instrumentality of any state other than Minnesota, and exempt from federal income taxes under the Internal Revenue Code or any other federal statute.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

Sec. 4.

289A.35 ASSESSMENTS ON RETURNS.

(a) The commissioner may audit and adjust the taxpayer's computation of new text beginfederal adjusted gross income, new text endfederal taxable income, items of federal tax preferences, or federal credit amounts to make them conform with the provisions of chapter 290 or section 298.01. If a return has been filed, the commissioner shall enter the liability reported on the return and may make any audit or investigation that is considered necessary.

(b) Upon petition by a taxpayer, and when the commissioner determines that it is in the best interest of the state, the commissioner may allow S corporations and partnerships to receive orders of assessment issued under section 270C.33, subdivision 4, on behalf of their owners, and to pay liabilities shown on such orders. In such cases, the owners' liability must be calculated using the method provided in section 289A.08, subdivision 7, paragraph (b).

(c) A taxpayer may petition the commissioner for the use of the method described in paragraph (b) after the taxpayer is notified that an audit has been initiated and before an order of assessment has been issued.

(d) A determination of the commissioner under paragraph (b) to grant or deny the petition of a taxpayer cannot be appealed to the Tax Court or any other court.

(e) The commissioner may audit and adjust the taxpayer's computation of tax under chapter 291. In the case of a return filed pursuant to section 289A.10, the commissioner shall notify the estate no later than nine months after the filing date, as provided by section 289A.38, subdivision 2, whether the return is under examination or the return has been processed as filed.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

Sec. 5.

Subd. 19.

Net income.

new text beginFor trusts and estates taxable under section 290.03, and corporations taxable under section 290.02, new text endthe term "net income" means the federal taxable income, as defined in section 63 of the Internal Revenue Code of 1986, as amended through the date named in this subdivision, incorporating the federal effective dates of changes to the Internal Revenue Code and any elections made by the taxpayer in accordance with the Internal Revenue Code in determining federal taxable income for federal income tax purposes, and with the modifications provided in sections 290.0131 to 290.0136.

new text beginFor individuals, the term "net income" means federal adjusted gross income, as defined in section 62 of the Internal Revenue Code of 1986, as amended through the date named in this subdivision, incorporating the federal effective dates of changes to the Internal Revenue Code and any elections made by the taxpayer in accordance with the Internal Revenue Code in determining federal adjusted gross income for federal income tax purposes, and with the modifications provided in sections 290.0131, 290.0132, 290.0135, and 290.0136.new text end

In the case of a regulated investment company or a fund thereof, as defined in section 851(a) or 851(g) of the Internal Revenue Code, federal taxable income means investment company taxable income as defined in section 852(b)(2) of the Internal Revenue Code, except that:

(1) the exclusion of net capital gain provided in section 852(b)(2)(A) of the Internal Revenue Code does not apply;

(2) the deduction for dividends paid under section 852(b)(2)(D) of the Internal Revenue Code must be applied by allowing a deduction for capital gain dividends and exempt-interest dividends as defined in sections 852(b)(3)(C) and 852(b)(5) of the Internal Revenue Code; and

(3) the deduction for dividends paid must also be applied in the amount of any undistributed capital gains which the regulated investment company elects to have treated as provided in section 852(b)(3)(D) of the Internal Revenue Code.

The net income of a real estate investment trust as defined and limited by section 856(a), (b), and (c) of the Internal Revenue Code means the real estate investment trust taxable income as defined in section 857(b)(2) of the Internal Revenue Code.

The net income of a designated settlement fund as defined in section 468B(d) of the Internal Revenue Code means the gross income as defined in section 468B(b) of the Internal Revenue Code.

new text beginFor corporations, resident individuals, and resident estates and trusts who make a valid election under section 965(h) of the Internal Revenue Code, including any successor in interest, net income for the tax year includes the ratable amount of deferred foreign income on which the taxpayer makes a federal tax payment in that year.new text end

The Internal Revenue Code of 1986, as amended through deleted text beginDecember 16, 2016deleted text endnew text begin March 24, 2018new text end, shall be in effect for taxable years beginning after December 31, 1996.

Except as otherwise provided, references to the Internal Revenue Code in this subdivision and sections 290.0131 to 290.0136 mean the code in effect for purposes of determining net income for the applicable year.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective the day following final enactment, except the changes incorporated by federal changes are effective retroactively at the same time as the changes became effective for federal purposes.new text end

Sec. 6.

Subd. 29a.

State itemized deduction.

"State itemized deduction" means federal itemized deductions, as defined in section 63(d) of the Internal Revenue Code, disregarding any deleted text beginlimitation under section 68 of the Internal Revenue Codedeleted text endnew text begin changes to itemized deductions made by Public Law 115-97 other than the changes made by section 13705(a)new text end, and deleted text beginreduced by the amount of the addition required under section 290.0131, subdivision 13deleted text endnew text begin disregarding the federal itemized deduction of income or sales taxes under section 164 of the Internal Revenue Codenew text end.

new text beginFor taxable years beginning after December 31, 2017, the amount that would have been allowable as interest under section 163(h)(3)(E) of the Internal Revenue Code, disregarding subparagraph 163(h)(3)(E)(iv), is allowed as a state itemized deduction.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

Sec. 7.

Minnesota Statutes 2016, section 290.01, is amended by adding a subdivision to read:

new text beginSubd. 29b.new text end

new text beginState standard deduction.new text end

new text begin"State standard deduction" means the federal standard deduction computed under section 63(c) and (f) of the Internal Revenue Code, as amended through December 16, 2016.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

Sec. 8.

Subd. 31.

Internal Revenue Code.

Unless specifically defined otherwise, "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended through deleted text beginDecember 16, 2016deleted text endnew text begin March 24, 2018new text end. Internal Revenue Code also includes any uncodified provision in federal law that relates to provisions of the Internal Revenue Code that are incorporated into Minnesota law. When used in this chapter, the reference to "subtitle A, chapter 1, subchapter N, part 1, of the Internal Revenue Code" is to the Internal Revenue Code as amended through March 18, 2010.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective the day following final enactment, except the changes incorporated by the federal changes are effective retroactively at the same time as the changes became effective for federal purposes.new text end

Sec. 9.

Subdivision 1.

Definition; scope.

(a) For the purposes of this section, "addition" means an amount that must be added to federal taxable income new text beginin the case of a trust or an estate or federal adjusted gross income in the case of an individual new text endin computing net income for the taxable year to which the amounts relate.

(b) The additions in this section apply to individuals, estates, and trusts.

(c) Unless specifically indicated or unless the context clearly indicates otherwise, only amounts that were deducted or excluded in computing federal taxable income new text beginin the case of a trust or an estate or federal adjusted gross income in the case of individuals new text endare an addition under this section.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

Sec. 10.

Subd. 3.

Income, sales and use, motor vehicle sales, or excise taxes paid.

deleted text begin(a)deleted text endnew text begin For trusts and estates,new text end the amount of income, sales and use, motor vehicle sales, or excise taxes paid or accrued within the taxable year under this chapter and the amount of taxes based on net income, sales and use, motor vehicle sales, or excise taxes paid to any other state or to any province or territory of Canada is an addition to the extent deducted under section 63(d) of the Internal Revenue Code.

deleted text begin(b) The addition under paragraph (a) may not be more than the amount by which the state itemized deduction exceeds the amount of the standard deduction as defined in section 63(c) of the Internal Revenue Code. For the purpose of this subdivision, income, sales and use, motor vehicle sales, or excise taxes are the last itemized deductions disallowed under subdivision 12.deleted text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

Sec. 11.

Subd. 10.

Section 179 expensing.

new text beginFor property placed in service in taxable years beginning before December 31, 2017, new text end80 percent of the amount by which the deduction allowed under the dollar limits of section 179 of the Internal Revenue Code exceeds the deduction allowable by section 179 of the Internal Revenue Code, as amended through December 31, 2003, is an addition.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

Sec. 12.

Subd. 12.

Disallowed itemized deductions.

(a) The amount of disallowed itemized deductions is an addition. The amount of disallowed itemized deductionsdeleted text begin, plus the addition required under subdivision 3,deleted text end may not be more than the amount by which thenew text begin statenew text end itemized deductionsdeleted text begin, as allowed under section 63(d) of the Internal Revenue Code,deleted text end exceeds the amount of the new text beginstate new text endstandard deduction deleted text beginas defined in section 63(c) of the Internal Revenue Codedeleted text end.

(b) The amount of disallowed itemized deductions is equal to the lesser of:

(1) three percent of the excess of the taxpayer's federal adjusted gross income over the applicable amount; or

(2) 80 percent of the amount of the new text beginstate new text enditemized deductions otherwise allowable to the taxpayer under the Internal Revenue Code for the taxable year.

(c) "Applicable amount" means $100,000, or $50,000 for a married individual filing a separate return. Each dollar amount is increased by an amount equal to:

(1) that dollar amount, multiplied by

(2) the cost-of-living adjustment determined under section 1(f)(3) of the Internal Revenue Codenew text begin, as amended through December 16, 2016,new text end for the calendar year in which the taxable year begins, by substituting "calendar year 1990" for "calendar year 1992" in subparagraph (B) of section 1(f)(3).

(d) "Itemized deductions" excludes:

(1) the deduction for medical expenses under section 213 of the Internal Revenue Code;

(2) any deduction for investment interest as defined in section 163(d) of the Internal Revenue Code; and

(3) the deduction under section 165(a) of the Internal Revenue Code for casualty or theft losses described in paragraph (2) or (3) of section 165(c) of the Internal Revenue Code or for losses described in section 165(d) of the Internal Revenue Code.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

(c) For a married individual filing a separate return, "applicable percentage" means two percentage points for each $1,250, or fraction of that amount, by which the taxpayer's federal adjusted gross income for the taxable year exceeds the threshold amount. For all other filers, applicable percentage means two percentage points for each $2,500, or fraction of that amount, by which the taxpayer's federal adjusted gross income for the taxable year exceeds the threshold amount. The applicable percentage must not exceed 100 percent.

(d) "Threshold amount" means:

(1) $150,000 for a joint return or a surviving spouse;

(2) $125,000 for a head of a household;

(3) $100,000 for an individual who is not married and who is not a surviving spouse or head of a household; and

(4) $75,000 for a married individual filing a separate return.

(e) The thresholds must be increased by an amount equal to:

(1) the threshold dollar amount, multiplied by

(2) the cost-of-living adjustment determined under section 1(f)(3) of the Internal Revenue Codenew text begin, as amended through December 16, 2016,new text end for the calendar year in which the taxable year begins, by substituting "calendar year 1990" for "calendar year 1992" in subparagraph (B) of section 1(f)(3).

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

Sec. 14.

Minnesota Statutes 2016, section 290.0131, is amended by adding a subdivision to read:

new text beginSubd. 15.new text end

new text begin529 plan addition.new text end

new text begin(a) The definitions under section 290.0684 apply for the purposes of this subdivision.new text end

new text begin(b) The amount of a distribution attributed to gain from a qualified account that is not used to pay qualified higher education expenses as defined in section 290.0684, subdivision 1, paragraph (e), is an addition to the distributee to the extent it is not included in federal taxable income.new text end

new text begin(c) The amount of distribution attributed to gain is determined by:new text end

new text begin(1) the total amount of contributions minus any distributions made for qualified higher education expenses made prior to the distribution that was not used to pay qualified higher education expenses;new text end

new text begin(2) divided by account value on the date of the distribution;new text end

new text begin(3) multiplied by the amount of the distribution;new text end

new text begin(4) the result of which is then subtracted from the amount of the distribution.new text end

new text begin(d) "Distributee" means the person who received the benefit of the distribution, but in the case of a dependent as defined under section 152 of the Internal Revenue Code, the distributee is the taxpayer who claims the dependent under section 151 of the Internal Revenue Code.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

Sec. 15.

Minnesota Statutes 2016, section 290.0131, is amended by adding a subdivision to read:

new text beginSubd. 16.new text end

new text beginAlimony received.new text end

new text begin(a) Alimony received is an addition to the recipient to the extent the alimony is not included in the recipient's federal adjusted gross income.new text end

new text begin(b) For the purposes of this subdivision, "alimony" is defined pursuant to section 71 of the Internal Revenue Code, as amended through December 16, 2016.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2018.new text end

Sec. 16.

Minnesota Statutes 2016, section 290.0131, is amended by adding a subdivision to read:

new text beginSubd. 17.new text end

new text beginSection 199A addition.new text end

new text beginFor trusts and estates, the amount deducted under section 199A of the Internal Revenue Code in computing the trust or estate's federal taxable income is an addition.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

Sec. 17.

Subdivision 1.

Definition; scope.

(a) For the purposes of this section, "subtraction" means an amount that shall be subtracted from federal taxable income new text beginin the case of a trust or an estate or federal adjusted gross income in the case of an individual new text endin computing net income for the taxable year to which the amounts relate.

(b) The subtractions in this section apply to individuals, estates, and trusts.

(c) Unless specifically indicated or unless the context clearly indicates otherwise, no amount deducted, subtracted, or otherwise excluded in computing federal taxable income new text beginin the case of a trust or an estate or federal adjusted gross income in the case of an individual new text endis a subtraction under this section.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

Sec. 18.

Subd. 7.

Charitable contributions for taxpayers who do not itemize.

To the extent not deducted or not deductible under section 408(d)(8)(E) of the Internal Revenue Code in determining federal deleted text begintaxabledeleted text endnew text begin adjusted grossnew text end income deleted text beginbydeleted text endnew text begin fornew text end an individualnew text begin or for an individualnew text endwho does not itemize deductions for deleted text beginfederaldeleted text endnew text begin Minnesotanew text end income tax purposes for the taxable year, an amount equal to 50 percent of the excess of charitable contributions over $500 allowable as a deduction for the taxable year under section 170(a) of the Internal Revenue Code is a subtraction.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

Sec. 19.

Subd. 20.

deleted text beginThe amount of the phaseout of personal exemptions under section 151(d) of the Internal Revenue Code is a subtraction.deleted text endnew text beginThe amount of personal and dependent exemptions calculated under section 290.0138 is a subtraction.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

Sec. 20.

Subd. 26.

Social Security benefits.

(a) A portion of Social Security benefits is allowed as a subtraction. The subtraction equals the lesser of Social Security benefits or a maximum subtraction subject to the limits under paragraphs (b), (c), and (d).

(b) For married taxpayers filing a joint return and surviving spouses, the maximum subtraction equals $4,500. The maximum subtraction is reduced by 20 percent of provisional income over $77,000. In no case is the subtraction less than zero.

(c) For single or head-of-household taxpayers, the maximum subtraction equals $3,500. The maximum subtraction is reduced by 20 percent of provisional income over $60,200. In no case is the subtraction less than zero.

(d) For married taxpayers filing separate returns, the maximum subtraction equals $2,250. The maximum subtraction is reduced by 20 percent of provisional income over $38,500. In no case is the subtraction less than zero.

(e) For purposes of this subdivision, "provisional income" means modified adjusted gross income as defined in section 86(b)(2) of the Internal Revenue Code, plus one-half of the Social Security benefits received during the taxable year, and "Social Security benefits" has the meaning given in section 86(d)(1) of the Internal Revenue Code.

(f) The commissioner shall adjust the maximum subtraction and threshold amounts in paragraphs (b) to (d) by the percentage determined pursuant to the provisions of section 1(f) of the Internal Revenue Codenew text begin, as amended through December 16, 2016new text end, except that in section 1(f)(3)(B) of the Internal Revenue Code the word "2016" shall be substituted for the word "1992." For 2018, the commissioner shall then determine the percentage change from the 12 months ending on August 31, 2016, to the 12 months ending on August 31, 2017, and in each subsequent year, from the 12 months ending on August 31, 2016, to the 12 months ending on August 31 of the year preceding the taxable year. The determination of the commissioner pursuant to this subdivision must not be considered a rule and is not subject to the Administrative Procedure Act contained in chapter 14, including section 14.386. The maximum subtraction and threshold amounts as adjusted must be rounded to the nearest $10 amount. If the amount ends in $5, the amount is rounded up to the nearest $10 amount.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

Sec. 21.

Minnesota Statutes 2016, section 290.0132, is amended by adding a subdivision to read:

new text beginSubd. 27.new text end

new text beginMoving expenses.new text end

new text beginMoving expenses that qualify as a deduction under section 217(a) through (f) of the Internal Revenue Code to the extent the expenses are not deducted in the computation of federal taxable income is a subtraction.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

Sec. 22.

Minnesota Statutes 2016, section 290.0132, is amended by adding a subdivision to read:

new text beginSubd. 28.new text end

new text beginAlimony payments.new text end

new text begin(a) Alimony paid is a subtraction to the extent that the alimony paid is not deducted in computing the individual's federal adjusted gross income.new text end

new text begin(b) For the purposes of this subdivision, "alimony" is defined pursuant to section 215 of the Internal Revenue Code, as amended through December 16, 2016.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2018.new text end

Sec. 23.

Minnesota Statutes 2016, section 290.0132, is amended by adding a subdivision to read:

new text beginSubd. 29.new text end

new text beginStandard or itemized deduction.new text end

new text beginThe amount allowed under section 290.0803 is a subtraction.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

Sec. 24.

Minnesota Statutes 2016, section 290.0132, is amended by adding a subdivision to read:

new text beginSubd. 30.new text end

new text beginTuition subtraction.new text end

new text beginThe amount that would have been allowable under section 222 of the Internal Revenue Code, disregarding paragraph (e) and only to the extent the amount is not deducted in computing federal adjusted gross income is a subtraction.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2018.new text end

Sec. 25.

Minnesota Statutes 2016, section 290.0132, is amended by adding a subdivision to read:

new text beginSubd. 31.new text end

new text beginDeferred foreign income of nonresidents.new text end

new text beginIn the case of a nonresident individual the amount of deferred foreign income recognized because of section 965 of the Internal Revenue Code is a subtraction.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective retroactively for taxable years beginning after December 31, 2016, and before January 1, 2019.new text end

Sec. 26.

Minnesota Statutes 2016, section 290.0132, is amended by adding a subdivision to read:

new text beginSubd. 32.new text end

new text beginThe amount of employer reimbursement excludable under section 132(f)(5)(F) of the Internal Revenue Code, as amended through December 16, 2017, is a subtraction for the employee receiving the reimbursement.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

Sec. 27.

Subd. 6.

Special deductions.

new text begin(a) new text endThe amount of any special deductions under sections 241 to 247 and deleted text begin965deleted text endnew text begin 250new text end of the Internal Revenue Code is an addition.

new text begin(b) The addition under this subdivision is reduced by the amount of the deduction under section 245A of the Internal Revenue Code that represents amounts included in federal taxable income in a prior taxable year under section 965 of the Internal Revenue Code.new text end

new text beginEFFECTIVE DATE.new text end

new text beginParagraph (a) is effective retroactively for taxable years beginning after December 31, 2016. Paragraph (b) is effective for taxable years beginning after December 31, 2017.new text end

Sec. 28.

Subd. 12.

Section 179 expensing.

new text beginFor property placed in service in taxable years beginning before December 31, 2017, new text end80 percent of the amount by which the deduction allowed under the dollar limits of section 179 of the Internal Revenue Code exceeds the deduction allowable by section 179 of the Internal Revenue Code, as amended through December 31, 2003, is an addition.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

Sec. 29.

Minnesota Statutes 2016, section 290.0133, is amended by adding a subdivision to read:

new text beginSubd. 15.new text end

new text beginDeferred foreign income.new text end

new text begin(a) The amount of the deduction provided under section 965(c) of the Internal Revenue Code is an addition.new text end

new text begin(b) For a taxpayer making a valid election under section 965(h) of the Internal Revenue Code, the addition under paragraph (a) must be applied ratably to the same tax periods in which the taxpayer includes deferred foreign income in Minnesota net income pursuant to section 290.01, subdivision 19.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective retroactively for taxable years beginning after December 31, 2016.new text end

Sec. 30.

new text begin[290.0138] PERSONAL AND DEPENDENT EXEMPTIONS.new text end

new text beginSubdivision 1.new text end

new text beginPersonal and dependent exemptions.new text end

new text begin(a) A taxpayer is allowed (1) a personal exemption in the amount of $4,150, and in the case of a married couple filing a joint return an additional personal exemption of $4,150; plus (2) a dependent exemption of $4,150 multiplied by the number of dependents of the taxpayer, as defined under sections 151 and 152 of the Internal Revenue Code.new text end

new text begin(b) The personal and dependent exemptions are not allowed to an individual who is eligible to be claimed as a dependent, as defined in sections 151 or 152 of the Internal Revenue Code, by another taxpayer.new text end

new text beginSubd. 2.new text end

new text beginCost-of-living adjustment.new text end

new text beginFor taxable years beginning after December 31, 2018, the commissioner shall annually adjust the amounts in subdivision 1 by the percentage determined pursuant to the provisions of section 1(f) of the Internal Revenue Code as amended through December 16, 2016, except that in section 1(f)(3)(B), the word "2017" shall be substituted for the word "1992." The exemption amount as adjusted for inflation must be rounded to the nearest $10. If the amount ends in $5, the commissioner shall round up to the next $10 amount. The determination of the commissioner under this subdivision is not a rule under the Administrative Procedure Act.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

Sec. 31.

Subd. 3.

Taxes imposed on exempt entities.

(a) An organization exempt from taxation under subdivision 2 shall, nevertheless, be subject to tax under this chapter to the extent provided in the following provisions of the Internal Revenue Code:

(1) section 527 (dealing with political organizations);

(2) section 528 (dealing with certain homeowners associations);

(3) sections 511 to 515 (dealing with unrelated business income);

(4) section 521 (dealing with farmers' cooperatives); and

(5) section 6033(e)(2) (dealing with lobbying expense); but notwithstanding this subdivision, shall be considered an organization exempt from income tax for the purposes of any law which refers to organizations exempt from income taxes.

(b) The tax shall be imposed on the taxable income of political organizations or homeowner associations or the unrelated business taxable income, as defined in section 512 of the Internal Revenue Code, of organizations defined in section 511 of the Internal Revenue Code, provided that the tax is not imposed on:

(1) advertising revenues from a newspaper published by an organization described in section 501(c)(4) of the Internal Revenue Code; or

(2) revenues from lawful gambling authorized under chapter 349 that are expended for purposes that qualify for the deduction for charitable contributions under section 170 of the Internal Revenue Code, disregarding the limitation under section 170(b)(2), but only to the extent the contributions are not deductible in computing federal taxable income.

The tax shall be at the corporate rates. The tax shall only be imposed on income and deductions assignable to this state under sections 290.17 to 290.20. To the extent deducted in computing federal taxable income, the deductions contained in section 290.21 shall not be allowed in computing Minnesota taxable net income.

(c) The tax shall be imposed on organizations subject to federal tax under section 6033(e)(2) of the Internal Revenue Code, in an amount equal to the corporate tax rate multiplied by the amount of lobbying expenses taxed under section 6033(e)(2) which are attributable to lobbying the Minnesota state government.

new text begin(d) In calculating unrelated business taxable income under section 512 of the Internal Revenue Code, the amount of any net operating loss deduction claimed under section 172 of the Internal Revenue Code is an addition. Taxpayers making an addition under this paragraph may deduct a net operating loss for the taxable year in the same manner as a corporation under section 290.095, in a form and manner prescribed by the commissioner, and may calculate the loss without the application of the limitation provided for under section 512(a)(6) of the Internal Revenue Code.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

Sec. 32.

Subd. 2c.

Schedules of rates for individuals, estates, and trusts.

(a) The income taxes imposed by this chapter upon married individuals filing joint returns and surviving spouses as defined in section 2(a) of the Internal Revenue Code must be computed by applying to their taxable net income the following schedule of rates:

(1) On the first $35,480, 5.35 percent;

(2) On all over $35,480, but not over $140,960, 7.05 percent;

(3) On all over $140,960, but not over $250,000, 7.85 percent;

(4) On all over $250,000, 9.85 percent.

Married individuals filing separate returns, estates, and trusts must compute their income tax by applying the above rates to their taxable income, except that the income brackets will be one-half of the above amounts.

(b) The income taxes imposed by this chapter upon unmarried individuals must be computed by applying to taxable net income the following schedule of rates:

(1) On the first $24,270, 5.35 percent;

(2) On all over $24,270, but not over $79,730, 7.05 percent;

(3) On all over $79,730, but not over $150,000, 7.85 percent;

(4) On all over $150,000, 9.85 percent.

(c) The income taxes imposed by this chapter upon unmarried individuals qualifying as a head of household as defined in section 2(b) of the Internal Revenue Code must be computed by applying to taxable net income the following schedule of rates:

(1) On the first $29,880, 5.35 percent;

(2) On all over $29,880, but not over $120,070, 7.05 percent;

(3) On all over $120,070, but not over $200,000, 7.85 percent;

(4) On all over $200,000, 9.85 percent.

(d) In lieu of a tax computed according to the rates set forth in this subdivision, the tax of any individual taxpayer whose taxable net income for the taxable year is less than an amount determined by the commissioner must be computed in accordance with tables prepared and issued by the commissioner of revenue based on income brackets of not more than $100. The amount of tax for each bracket shall be computed at the rates set forth in this subdivision, provided that the commissioner may disregard a fractional part of a dollar unless it amounts to 50 cents or more, in which case it may be increased to $1.

(e) An individual who is not a Minnesota resident for the entire year must compute the individual's Minnesota income tax as provided in this subdivision. After the application of the nonrefundable credits provided in this chapter, the tax liability must then be multiplied by a fraction in which:

(1) the numerator is the individual's Minnesota source federal adjusted gross income as defined in section 62 of the Internal Revenue Code and increased by the additions required under section 290.0131, subdivisions 2deleted text beginanddeleted text endnew text begin,new text end 6new text begin, and 8new text end to deleted text begin11deleted text endnew text begin 10new text end, and reduced by the Minnesota assignable portion of the subtraction for United States government interest under section 290.0132, subdivision 2, and the subtractions under section 290.0132, subdivisions 9, 10, 14, 15, 17, and 18, after applying the allocation and assignability provisions of section 290.081, clause (a), or 290.17; and

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017, except the amendment to the list of subdivisions of section 290.0132 in paragraph (e), clause (2), is effective retroactively for taxable years beginning after December 31, 2016.new text end

Sec. 33.

Subd. 2d.

Inflation adjustment of brackets.

(a) For taxable years beginning after December 31, 2013, the minimum and maximum dollar amounts for each rate bracket for which a tax is imposed in subdivision 2c shall be adjusted for inflation by the percentage determined under paragraph (b). For the purpose of making the adjustment as provided in this subdivision all of the rate brackets provided in subdivision 2c shall be the rate brackets as they existed for taxable years beginning after December 31, 2012, and before January 1, 2014. The rate applicable to any rate bracket must not be changed. The dollar amounts setting forth the tax shall be adjusted to reflect the changes in the rate brackets. The rate brackets as adjusted must be rounded to the nearest $10 amount. If the rate bracket ends in $5, it must be rounded up to the nearest $10 amount.

(b) The commissioner shall adjust the rate brackets and by the percentage determined pursuant to the provisions of section 1(f) of the Internal Revenue Codenew text begin, as amended through December 16, 2016new text end, except that in section 1(f)(3)(B) the word "2012" shall be substituted for the word "1992." For 2014, the commissioner shall then determine the percent change from the 12 months ending on August 31, 2012, to the 12 months ending on August 31, 2013, and in each subsequent year, from the 12 months ending on August 31, 2012, to the 12 months ending on August 31 of the year preceding the taxable year. The determination of the commissioner pursuant to this subdivision shall not be considered a "rule" and shall not be subject to the Administrative Procedure Act contained in chapter 14.

No later than December 15 of each year, the commissioner shall announce the specific percentage that will be used to adjust the tax rate brackets.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

Sec. 34.

Subd. 2a.

Income.

(a) For purposes of this section, "income" means the sum of the following:

(1) federal adjusted gross income as defined in section 62 of the Internal Revenue Code; and

(2) the sum of the following amounts to the extent not included in clause (1):

(i) all nontaxable income;

(ii) the amount of a passive activity loss that is not disallowed as a result of section 469, paragraph (i) or (m) of the Internal Revenue Code and the amount of passive activity loss carryover allowed under section 469(b) of the Internal Revenue Code;

(iii) an amount equal to the total of any discharge of qualified farm indebtedness of a solvent individual excluded from gross income under section 108(g) of the Internal Revenue Code;

(iv) cash public assistance and relief;

(v) any pension or annuity (including railroad retirement benefits, all payments received under the federal Social Security Act, Supplemental Security Income, and veterans benefits), which was not exclusively funded by the claimant or spouse, or which was funded exclusively by the claimant or spouse and which funding payments were excluded from federal adjusted gross income in the years when the payments were made;

(vi) interest received from the federal or a state government or any instrumentality or political subdivision thereof;

(vii) workers' compensation;

(viii) nontaxable strike benefits;

(ix) the gross amounts of payments received in the nature of disability income or sick pay as a result of accident, sickness, or other disability, whether funded through insurance or otherwise;

(x) a lump-sum distribution under section 402(e)(3) of the Internal Revenue Code of 1986, as amended through December 31, 1995;

(xi) contributions made by the claimant to an individual retirement account, including a qualified voluntary employee contribution; simplified employee pension plan; self-employed retirement plan; cash or deferred arrangement plan under section 401(k) of the Internal Revenue Code; or deferred compensation plan under section 457 of the Internal Revenue Code;

(xii) nontaxable scholarship or fellowship grants;

deleted text begin(xiii) the amount of deduction allowed under section 199 of the Internal Revenue Code;deleted text end

new text begin(xvi) alimony received to the extent not included in the recipient's income.new text end

In the case of an individual who files an income tax return on a fiscal year basis, the term "federal adjusted gross income" means federal adjusted gross income reflected in the fiscal year ending in the next calendar year. Federal adjusted gross income may not be reduced by the amount of a net operating loss carryback or carryforward or a capital loss carryback or carryforward allowed for the year.

(2) amounts of any pension or annuity that were exclusively funded by the claimant or spouse if the funding payments were not excluded from federal adjusted gross income in the years when the payments were made;

(3) surplus food or other relief in kind supplied by a governmental agency;

(4) relief granted under chapter 290A;

(5) child support payments received under a temporary or final decree of dissolution or legal separation; deleted text beginanddeleted text end

(6) restitution payments received by eligible individuals and excludable interest as defined in section 803 of the Economic Growth and Tax Relief Reconciliation Act of 2001, Public Law 107-16deleted text begin.deleted text endnew text begin; andnew text end

new text beginEFFECTIVE DATE.new text end

Sec. 35.

Subd. 2b.

Inflation adjustment.

The commissioner shall adjust the dollar amount of the income threshold at which the maximum credit begins to be reduced under subdivision 1 by the percentage determined pursuant to the provisions of section 1(f) of the Internal Revenue Codenew text begin, as amended through December 16, 2016new text end, except that in section 1(f)(3)(B) the word "2016" shall be substituted for the word "1992." For 2018, the commissioner shall then determine the percent change from the 12 months ending on August 31, 2016, to the 12 months ending on August 31, 2017, and in each subsequent year, from the 12 months ending on August 31, 2016, to the 12 months ending on August 31 of the year preceding the taxable year. The determination of the commissioner pursuant to this subdivision must not be considered a "rule" and is not subject to the Administrative Procedure Act contained in chapter 14. The threshold amount as adjusted must be rounded to the nearest $10 amount. If the amount ends in $5, the amount is rounded up to the nearest $10 amount.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

Sec. 36.

Subdivision 1.

Definitions.

(a) For purposes of this section, the following terms have the meanings given.

(b) "Long-term care insurance" means a policy that:

(1) qualifies for a deduction under section 213 of the Internal Revenue Code, disregarding the adjusted gross income test; or meets the requirements given in section 62A.46; or provides similar coverage issued under the laws of another jurisdiction; and

(2) has a lifetime long-term care benefit limit of not less than $100,000; and

(3) has been offered in compliance with the inflation protection requirements of section 62S.23.

(c) "Qualified beneficiary" means the taxpayer or the taxpayer's spouse.

new text beginEFFECTIVE DATE.new text end

Sec. 37.

Subd. 2.

Credit.

A taxpayer is allowed a credit against the tax imposed by this chapter for long-term care insurance policy premiums paid during the tax year. The credit for each policy equals 25 percent of premiums paid to the extent not deducted in determining deleted text beginfederal taxabledeleted text endnew text begin netnew text end income. A taxpayer may claim a credit for only one policy for each qualified beneficiary. A maximum of $100 applies to each qualified beneficiary. The maximum total credit allowed per year is $200 for married couples filing joint returns and $100 for all other filers. For a nonresident or part-year resident, the credit determined under this section must be allocated based on the percentage calculated under section 290.06, subdivision 2c, paragraph (e).

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

Sec. 38.

Subdivision 1.

Definitions.

(a) For purposes of this section, the following terms have the meanings given.

(b) "Account" means the historic credit administration account in the special revenue fund.

(c) "Office" means the State Historic Preservation Office of the Department of Administration.

(d) "Project" means rehabilitation of a certified historic structure, as defined in section 47(c)(3)(A) of the Internal Revenue Code, that is located in Minnesota and is allowed a federal credit.

(e) "Federal credit" means the credit allowed under section deleted text begin47(a)(2)deleted text endnew text begin 47(a)new text end of the Internal Revenue Codenew text begin, except that the amount allowed is deemed to be allocated in the taxable year that the project is placed in servicenew text end.

(f) "Placed in service" has the meaning used in section 47 of the Internal Revenue Code.

(g) "Qualified rehabilitation expenditures" has the meaning given in section 47 of the Internal Revenue Code.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for applications for allocation certificates submitted after December 31, 2017.new text end

Sec. 39.

Subd. 2.

Credit or grant allowed; certified historic structure.

(a) A credit is allowed against the tax imposed under this chapter equal to not more than 100 percent of the credit allowed under section deleted text begin47(a)(2)deleted text endnew text begin 47(a)new text end of the Internal Revenue Code for a project. new text beginThe credit is payable in an amount equal to one-fifth of the total credit amount allowed in the five taxable years beginning with the year the project is placed in service. new text endTo qualify for the credit:

(1) the project must receive Part 3 certification and be placed in service during the taxable year; and

(2) the taxpayer must be allowed the federal credit and be issued a credit certificate for the taxable year as provided in subdivision 4.

(b) The commissioner of administration may pay a grant in lieu of the credit. The grant equals 90 percent of the credit that would be allowed for the project.new text begin The grant is payable in an amount equal to one-fifth of 90 percent of the credit that would be allowed for the project in the five taxable years beginning with the year the project is placed in service.new text end

(c) In lieu of the credit under paragraph (a), an insurance company may claim a credit against the insurance premiums tax imposed under chapter 297I.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for applications for allocation certificates submitted after December 31, 2017.new text end

Sec. 40.

Subd. 3.

Applications; allocations.

(a) To qualify for a credit or grant under this section, the developer of a project must apply to the office before the rehabilitation begins. The application must contain the information and be in the form prescribed by the office. The office may collect a fee for application of up to 0.5 percent of qualified rehabilitation expenditures, up to $40,000, based on estimated qualified rehabilitation expenditures, to offset costs associated with personnel and administrative expenses related to administering the credit and preparing the economic impact report in subdivision 9. Application fees are deposited in the account. The application must indicate if the application is for a credit or a grant in lieu of the credit or a combination of the two and designate the taxpayer qualifying for the credit or the recipient of the grant.

(2) state the amount of credit or grant anticipated with the project, with the credit amount equal to 100 percent and the grant amount equal to 90 percent of the federal credit anticipated in the application;

(3) state that the credit or grant allowed may increase or decrease if the federal credit the project receives at the time it is placed in service is different than the amount anticipated at the time the allocation certificate is issued; and

(4) state the fiscal year in which the credit or grant is allocated, and that the taxpayer or grant recipient is entitled to receive new text beginone-fifth of the total amount of either new text endthe credit or new text beginthe new text endgrant at the time the project is placed in service, provided that date is within three calendar years following the issuance of the allocation certificate.

(c) The office, in consultation with the commissioner, shall determine if the project is eligible for a credit or a grant under this section and must notify the developer in writing of its determination. Eligibility for the credit is subject to review and audit by the commissioner.

(d) The federal credit recapture and repayment requirements under section 50 of the Internal Revenue Code do not apply to the credit allowed under this section.

(e) Any decision of the office under paragraph (c) may be challenged as a contested case under chapter 14. The contested case proceeding must be initiated within 45 days of the date of written notification by the office.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for applications for allocation certificates submitted after December 31, 2017.new text end

Sec. 41.

Subd. 4.

Credit certificates; grants.

(a)(1) The developer of a project for which the office has issued an allocation certificate must notify the office when the project is placed in service. Upon verifying that the project has been placed in service, and was allowed a federal credit, the office must issue a credit certificate to the taxpayer designated in the application or must issue a grant to the recipient designated in the application. The credit certificate must state the amount of the credit.

(2) The credit amount equals the federal credit allowed for the project.

(3) The grant amount equals 90 percent of the federal credit allowed for the project.

(b) The recipient of a credit certificate may assign the certificate to another taxpayernew text beginbefore the first one-fifth payment is claimednew text end, which is then allowed the credit under this section or section 297I.20, subdivision 3. An assignment is not valid unless the assignee notifies the commissioner within 30 days of the date that the assignment is made. The commissioner shall prescribe the forms necessary for notifying the commissioner of the assignment of a credit certificate and for claiming a credit by assignment.

(c) Credits passed through to partners, members, shareholders, or owners pursuant to subdivision 5 are not an assignment of a credit certificate under this subdivision.

(d) A grant agreement between the office and the recipient of a grant may allow the grant to be issued to another individual or entity.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for applications for allocation certificates submitted after December 31, 2017.new text end

new text beginEFFECTIVE DATE.new text end

Sec. 43.

Subd. 2.

Credit allowed.

(a) An individual who is a resident of Minnesota is allowed a credit against the tax imposed by this chapter. The credit is not allowed to an individual who is eligible to be claimed as a dependent, as defined in sections 151 and 152 of the Internal Revenue Code. The credit may not exceed the liability for tax under this chapter.

(b) The amount of the credit allowed equals 50 percent of contributions for the taxable year. The maximum credit is $500, subject to the phaseout in paragraphs (c) and (d). In no case is the credit less than zero.

(c) For individual filers, the maximum credit is reduced by two percent of adjusted gross income in excess of $75,000.

(d) For married couples filing a joint return, the maximum credit is phased out as follows:

(1) for married couples with adjusted gross income in excess of $75,000, but not more than $100,000, the maximum credit is reduced by one percent of adjusted gross income in excess of $75,000;

(2) for married couples with adjusted gross income in excess of $100,000, but not more than $135,000, the maximum credit is $250; and

(3) for married couples with adjusted gross income in excess of $135,000, the maximum credit is $250, reduced by one percent of adjusted gross income in excess of $135,000.

(e) The income thresholds in paragraphs (c) and (d) used to calculate the maximum credit must be adjusted for inflation. The commissioner shall adjust the income thresholds by the percentage determined under the provisions of section 1(f) of the Internal Revenue Codenew text begin, as amended through December 16, 2016new text end, except that in section 1(f)(3)(B) the word "2016" is substituted for the word "1992." For 2018, the commissioner shall then determine the percent change from the 12 months ending on August 31, 2016, to the 12 months ending on August 31, 2017, and in each subsequent year, from the 12 months ending on August 31, 2016, to the 12 months ending on August 31 of the year preceding the taxable year. The income thresholds as adjusted for inflation must be rounded to the nearest $10 amount. If the amount ends in $5, the amount is rounded up to the nearest $10 amount. The determination of the commissioner under this subdivision is not subject to chapter 14, including section 14.386.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

Sec. 44.

Subd. 2.

Subtraction.

(a) A qualified individual is allowed a subtraction from federal deleted text begintaxabledeleted text endnew text begin adjusted grossnew text end income of the individual's subtraction base amount. The excess of the subtraction base amount over the taxable net income computed without regard to the subtraction for the elderly or disabled under section 290.0132, subdivision 5, may be used to reduce the amount of a lump sum distribution subject to tax under section 290.032.

(b)(1) The initial subtraction base amount equals

(i) $12,000 for a married taxpayer filing a joint return if a spouse is a qualified individual,

(ii) $9,600 for a single taxpayer, and

(iii) $6,000 for a married taxpayer filing a separate federal return.

(2) The qualified individual's initial subtraction base amount, then, must be reduced by the sum of nontaxable retirement and disability benefits and one-half of the amount of adjusted gross income in excess of the following thresholds:

(i) $18,000 for a married taxpayer filing a joint return if both spouses are qualified individuals,

(ii) $14,500 for a single taxpayer or for a married couple filing a joint return if only one spouse is a qualified individual, and

(iii) $9,000 for a married taxpayer filing a separate federal return.

(3) In the case of a qualified individual who is under the age of 65, the maximum amount of the subtraction base may not exceed the taxpayer's disability income.

(4) The resulting amount is the subtraction base amount.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

Sec. 45.

new text begin[290.0803] STANDARD OR ITEMIZED DEDUCTION.new text end

new text beginSubdivision 1.new text end

new text beginElection.new text end

new text beginAn individual may elect to claim a state standard deduction in lieu of state itemized deductions. However, in the case of a married individual filing a separate return, if one spouse elects to claim state itemized deductions, the other spouse is not allowed a state standard deduction.new text end

new text beginSubd. 2.new text end

new text beginSubtraction.new text end

new text beginBased on the election under subdivision 1, individuals are allowed to subtract from federal adjusted gross income the state standard deduction or the state itemized deduction.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

(i) the charitable contribution deduction under section 170 of the Internal Revenue Code;

(ii) the medical expense deduction;

(iii) the casualty, theft, and disaster loss deduction; and

(iv) the impairment-related work expenses of a disabled person;

(3) for depletion allowances computed under section 613A(c) of the Internal Revenue Code, with respect to each property (as defined in section 614 of the Internal Revenue Code), to the extent not included in federal alternative minimum taxable income, the excess of the deduction for depletion allowable under section 611 of the Internal Revenue Code for the taxable year over the adjusted basis of the property at the end of the taxable year (determined without regard to the depletion deduction for the taxable year);

(4) to the extent not included in federal alternative minimum taxable income, the amount of the tax preference for intangible drilling cost under section 57(a)(2) of the Internal Revenue Code determined without regard to subparagraph (E);

(5) to the extent not included in federal alternative minimum taxable income, the amount of interest income as provided by section 290.0131, subdivision 2; deleted text beginanddeleted text end

(ii) an overpayment of state income tax as provided by section 290.0132, subdivision 3, to the extent included in federal alternative minimum taxable income;

(iii) the amount of investment interest paid or accrued within the taxable year on indebtedness to the extent that the amount does not exceed net investment income, as defined in section 163(d)(4) of the Internal Revenue Code. Interest does not include amounts deducted in computing federal adjusted gross income;

new text begin(vi) the amount which would have been an allowable deduction under section 165(h) of the Internal Revenue Code, as amended through December 16, 2016, and which was taken as a Minnesota itemized deduction under section 290.01, subdivision 29.new text end

In the case of an estate or trust, alternative minimum taxable income must be computed as provided in section 59(c) of the Internal Revenue Codenew text begin, except alternative minimum taxable income must be increased by the addition in section 290.0131, subdivision 17new text end.

(d) "Regular tax" means the tax that would be imposed under this chapter (without regard to this section and section 290.032), reduced by the sum of the nonrefundable credits allowed under this chapter.

new text beginEFFECTIVE DATE.new text end

Sec. 47.

Subd. 3.

Exemption amount.

(a) For purposes of computing the alternative minimum tax, the exemption amount is, for taxable years beginning after December 31, 2005, $60,000 for married couples filing joint returns, $30,000 for married individuals filing separate returns, estates, and trusts, and $45,000 for unmarried individuals.

(b) The exemption amount determined under this subdivision is subject to the phase out under section deleted text begin55(d)(3)deleted text endnew text begin 55(d)(2) and (4)new text end of the Internal Revenue Code, except that alternative minimum taxable income as determined under this section must be substituted in the computation of the phase out.

(c) For taxable years beginning after December 31, 2006, the exemption amount under paragraph (a) must be adjusted for inflation. The commissioner shall adjust the exemption amount by the percentage determined pursuant to the provisions of section 1(f) of the Internal Revenue Codenew text begin, as amended through December 16, 2016new text end, except that in section 1(f)(3)(B) the word "2005" shall be substituted for the word "1992." For 2007, the commissioner shall then determine the percent change from the 12 months ending on August 31, 2005, to the 12 months ending on August 31, 2006, and in each subsequent year, from the 12 months ending on August 31, 2005, to the 12 months ending on August 31 of the year preceding the taxable year. The exemption amount as adjusted must be rounded to the nearest $10. If the amount ends in $5, it must be rounded up to the nearest $10 amount. The determination of the commissioner under this subdivision is not a rule under the Administrative Procedure Act.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

(c) The "exemption amount" is $40,000, reduced, but not below zero, by 25 percent of the excess of alternative minimum taxable income over $150,000.

(d) "Minnesota alternative minimum taxable income" is alternative minimum taxable net income, less the deductions for alternative tax net operating loss under subdivision 4; and dividends received under subdivision 6. The sum of the deductions under this paragraph may not exceed 90 percent of alternative minimum taxable net income. This limitation does not apply to:

(1) a deduction for dividends paid to or received from a corporation which is subject to tax under section 290.36 and which is a member of an affiliated group of corporations as defined by the Internal Revenue Code; or

(2) a deduction for dividends received from a property and casualty insurer as defined under section 60A.60, subdivision 8, which is a member of an affiliated group of corporations as defined by the Internal Revenue Code and either: (i) the dividend is eliminated in consolidation under Treasury Regulation 1.1502-14(a), as amended through December 31, 1989; or (ii) the dividend is deducted under an election under section 243(b) of the Internal Revenue Code.

new text begin(e) "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended through December 16, 2016.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

Sec. 49.

Subdivision 1.

Imposition.

(a) In addition to the tax imposed by this chapter without regard to this section, the franchise tax imposed on a corporation required to file under section 289A.08, subdivision 3, other than a corporation treated as an "S" corporation under section 290.9725 for the taxable year includes a tax equal to the following amounts:

If the sum of the corporation's Minnesota property, payrolls, and sales or receipts is:

the tax equals:

less than

$

930,000

$

0

$

930,000

to

$

1,869,999

$

190

$

1,870,000

to

$

9,339,999

$

560

$

9,340,000

to

$

18,679,999

$

1,870

$

18,680,000

to

$

37,359,999

$

3,740

$

37,360,000

or

more

$

9,340

(b) A tax is imposed for each taxable year on a corporation required to file a return under section 289A.12, subdivision 3, that is treated as an "S" corporation under section 290.9725and on a partnership required to file a return under section 289A.12, subdivision 3, other than a partnership that derives over 80 percent of its income from farming. The tax imposed under this paragraph is due on or before the due date of the return for the taxpayer due under section 289A.18, subdivision 1. The commissioner shall prescribe the return to be used for payment of this tax. The tax under this paragraph is equal to the following amounts:

If the sum of the S corporation's or partnership's Minnesota property, payrolls, and sales or receipts is:

the tax equals:

less than

$

930,000

$

0

$

930,000

to

$

1,869,999

$

190

$

1,870,000

to

$

9,339,999

$

560

$

9,340,000

to

$

18,679,999

$

1,870

$

18,680,000

to

$

37,359,999

$

3,740

$

37,360,000

or

more

$

9,340

(c) The commissioner shall adjust the dollar amounts of both the tax and the property, payrolls, and sales or receipts thresholds in paragraphs (a) and (b) by the percentage determined pursuant to the provisions of section 1(f) of the Internal Revenue Codenew text begin, as amended through December 16, 2016new text end, except that in section 1(f)(3)(B) the word "2012" must be substituted for the word "1992." For 2014, the commissioner shall determine the percentage change from the 12 months ending on August 31, 2012, to the 12 months ending on August 31, 2013, and in each subsequent year, from the 12 months ending on August 31, 2012, to the 12 months ending on August 31 of the year preceding the taxable year. The determination of the commissioner pursuant to this subdivision is not a "rule" subject to the Administrative Procedure Act contained in chapter 14. The tax amounts as adjusted must be rounded to the nearest $10 amount and the threshold amounts must be adjusted to the nearest $10,000 amount. For tax amounts that end in $5, the amount is rounded up to the nearest $10 amount and for the threshold amounts that end in $5,000, the amount is rounded up to the nearest $10,000.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

Sec. 50.

Subd. 2.

Defined and limited.

(a) The term "net operating loss" as used in this section shall mean a net operating loss as defined in section 172(c) of the Internal Revenue Code, with the modifications specified in subdivision 4. The deductions provided in section 290.21cannot be used in the determination of a net operating loss.

(b) The term "net operating loss deduction" as used in this section means the aggregate of the net operating loss carryovers to the taxable year, computed in accordance with subdivision 3. The provisions of section 172(b) of the Internal Revenue Code relating to the carryback of net operating losses, do not apply.

new text begin(c) The net operating loss deduction under this section may not offset more than 80 percent of taxable net income in a single taxable year.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

Sec. 51.

Subd. 2.

Income not derived from conduct of a trade or business.

The income of a taxpayer subject to the allocation rules that is not derived from the conduct of a trade or business must be assigned in accordance with paragraphs (a) to (f):

(a)(1) Subject to paragraphs (a)(2) and (a)(3), income from wages as defined in section 3401(a) deleted text beginanddeleted text endnew text begin,new text end (f)new text begin, and (i)new text end of the Internal Revenue Code is assigned to this state if, and to the extent that, the work of the employee is performed within it; all other income from such sources is treated as income from sources without this state.

Severance pay shall be considered income from labor or personal or professional services.

(2) In the case of an individual who is a nonresident of Minnesota and who is an athlete or entertainer, income from compensation for labor or personal services performed within this state shall be determined in the following manner:

(i) the amount of income to be assigned to Minnesota for an individual who is a nonresident salaried athletic team employee shall be determined by using a fraction in which the denominator contains the total number of days in which the individual is under a duty to perform for the employer, and the numerator is the total number of those days spent in Minnesota. For purposes of this paragraph, off-season training activities, unless conducted at the team's facilities as part of a team imposed program, are not included in the total number of duty days. Bonuses earned as a result of play during the regular season or for participation in championship, play-off, or all-star games must be allocated under the formula. Signing bonuses are not subject to allocation under the formula if they are not conditional on playing any games for the team, are payable separately from any other compensation, and are nonrefundable; and

(ii) the amount of income to be assigned to Minnesota for an individual who is a nonresident, and who is an athlete or entertainer not listed in item (i), for that person's athletic or entertainment performance in Minnesota shall be determined by assigning to this state all income from performances or athletic contests in this state.

(3) For purposes of this section, amounts received by a nonresident as "retirement income" as defined in section (b)(1) of the State Income Taxation of Pension Income Act, Public Law 104-95, are not considered income derived from carrying on a trade or business or from wages or other compensation for work an employee performed in Minnesota, and are not taxable under this chapter.

(b) Income or gains from tangible property located in this state that is not employed in the business of the recipient of the income or gains must be assigned to this state.

(c) Income or gains from intangible personal property not employed in the business of the recipient of the income or gains must be assigned to this state if the recipient of the income or gains is a resident of this state or is a resident trust or estate.

Gain on the sale of a partnership interest is allocable to this state in the ratio of the original cost of partnership tangible property in this state to the original cost of partnership tangible property everywhere, determined at the time of the sale. If more than 50 percent of the value of the partnership's assets consists of intangibles, gain or loss from the sale of the partnership interest is allocated to this state in accordance with the sales factor of the partnership for its first full tax period immediately preceding the tax period of the partnership during which the partnership interest was sold.

Gain on the sale of an interest in a single member limited liability company that is disregarded for federal income tax purposes is allocable to this state as if the single member limited liability company did not exist and the assets of the limited liability company are personally owned by the sole member.

Gain on the sale of goodwill or income from a covenant not to compete that is connected with a business operating all or partially in Minnesota is allocated to this state to the extent that the income from the business in the year preceding the year of sale was allocable to Minnesota under subdivision 3.

When an employer pays an employee for a covenant not to compete, the income allocated to this state is in the ratio of the employee's service in Minnesota in the calendar year preceding leaving the employment of the employer over the total services performed by the employee for the employer in that year.

(d) Income from winnings on a bet made by an individual while in Minnesota is assigned to this state. In this paragraph, "bet" has the meaning given in section 609.75, subdivision 2, as limited by section 609.75, subdivision 3, clauses (1), (2), and (3).

(e) All items of gross income not covered in paragraphs (a) to (d) and not part of the taxpayer's income from a trade or business shall be assigned to the taxpayer's domicile.

(f) For the purposes of this section, working as an employee shall not be considered to be conducting a trade or business.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for wages paid after December 31, 2017.new text end

Sec. 52.

Minnesota Statutes 2016, section 290.21, is amended by adding a subdivision to read:

new text beginSubd. 9.new text end

new text beginControlled foreign corporations.new text end

new text beginFor the purposes of this chapter, the net income of a domestic corporation that is included pursuant to sections 951, 951A, and 965 of the Internal Revenue Code is dividend income.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective retroactively for taxable years beginning after December 21, 2016.new text end

Sec. 53.

Subdivision 1.

Definitions.

(1) Wages. For purposes of this section, the term "wages" means the same as that term is defined in section 3401(a) deleted text beginanddeleted text endnew text begin,new text end (f)new text begin, and (i)new text end of the Internal Revenue Code.

(2) Payroll period. For purposes of this section the term "payroll period" means a period for which a payment of wages is ordinarily made to the employee by the employee's employer, and the term "miscellaneous payroll period" means a payroll period other than a daily, weekly, biweekly, semimonthly, monthly, quarterly, semiannual, or annual payroll period.

(3) Employee. For purposes of this section the term "employee" means any resident individual performing services for an employer, either within or without, or both within and without the state of Minnesota, and every nonresident individual performing services within the state of Minnesota, the performance of which services constitute, establish, and determine the relationship between the parties as that of employer and employee. As used in the preceding sentence, the term "employee" includes an officer of a corporation, and an officer, employee, or elected official of the United States, a state, or any political subdivision thereof, or the District of Columbia, or any agency or instrumentality of any one or more of the foregoing.

(4) Employer. For purposes of this section the term "employer" means any person, including individuals, fiduciaries, estates, trusts, partnerships, limited liability companies, and corporations transacting business in or deriving any income from sources within the state of Minnesota for whom an individual performs or performed any service, of whatever nature, as the employee of such person, except that if the person for whom the individual performs or performed the services does not have control of the payment of the wages for such services, the term "employer," except for purposes of paragraph (1), means the person having control of the payment of such wages. As used in the preceding sentence, the term "employer" includes any corporation, individual, estate, trust, or organization which is exempt from taxation under section 290.05 and further includes, but is not limited to, officers of corporations who have control, either individually or jointly with another or others, of the payment of the wages.

(5) Number of withholding exemptions claimed. For purposes of this section, the term "number of withholding exemptions claimed" means the number of withholding exemptions claimed in a withholding exemption certificate in effect under subdivision 5, except that if no such certificate is in effect, the number of withholding exemptions claimed shall be considered to be zero.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for wages paid after July 1, 2018.new text end

Sec. 54.

Subd. 3.

Income.

(1) federal adjusted gross income as defined in the Internal Revenue Code; and

(2) the sum of the following amounts to the extent not included in clause (1):

(i) all nontaxable income;

(ii) the amount of a passive activity loss that is not disallowed as a result of section 469, paragraph (i) or (m) of the Internal Revenue Code and the amount of passive activity loss carryover allowed under section 469(b) of the Internal Revenue Code;

(iii) an amount equal to the total of any discharge of qualified farm indebtedness of a solvent individual excluded from gross income under section 108(g) of the Internal Revenue Code;

(iv) cash public assistance and relief;

(v) any pension or annuity (including railroad retirement benefits, all payments received under the federal Social Security Act, Supplemental Security Income, and veterans benefits), which was not exclusively funded by the claimant or spouse, or which was funded exclusively by the claimant or spouse and which funding payments were excluded from federal adjusted gross income in the years when the payments were made;

(vi) interest received from the federal or a state government or any instrumentality or political subdivision thereof;

(vii) workers' compensation;

(viii) nontaxable strike benefits;

(ix) the gross amounts of payments received in the nature of disability income or sick pay as a result of accident, sickness, or other disability, whether funded through insurance or otherwise;

(x) a lump-sum distribution under section 402(e)(3) of the Internal Revenue Code of 1986, as amended through December 31, 1995;

(xi) contributions made by the claimant to an individual retirement account, including a qualified voluntary employee contribution; simplified employee pension plan; self-employed retirement plan; cash or deferred arrangement plan under section 401(k) of the Internal Revenue Code; or deferred compensation plan under section 457 of the Internal Revenue Code, to the extent the sum of amounts exceeds the retirement base amount for the claimant and spouse;

(xii) to the extent not included in federal adjusted gross income, distributions received by the claimant or spouse from a traditional or Roth style retirement account or plan;

(xiii) nontaxable scholarship or fellowship grants;

deleted text begin(xiv) the amount of deduction allowed under section 199 of the Internal Revenue Code;deleted text end

new text begin(xvii) alimony to the extent not included in the recipient's income.new text end

In the case of an individual who files an income tax return on a fiscal year basis, the term "federal adjusted gross income" shall mean federal adjusted gross income reflected in the fiscal year ending in the calendar year. Federal adjusted gross income shall not be reduced by the amount of a net operating loss carryback or carryforward or a capital loss carryback or carryforward allowed for the year.

(2) amounts of any pension or annuity which was exclusively funded by the claimant or spouse and which funding payments were not excluded from federal adjusted gross income in the years when the payments were made;

(3) to the extent included in federal adjusted gross income, amounts contributed by the claimant or spouse to a traditional or Roth style retirement account or plan, but not to exceed the retirement base amount reduced by the amount of contributions excluded from federal adjusted gross income, but not less than zero;

(4) surplus food or other relief in kind supplied by a governmental agency;

(5) relief granted under this chapter;

(6) child support payments received under a temporary or final decree of dissolution or legal separation; deleted text beginordeleted text end

(7) restitution payments received by eligible individuals and excludable interest as defined in section 803 of the Economic Growth and Tax Relief Reconciliation Act of 2001, Public Law 107-16deleted text begin.deleted text endnew text begin; ornew text end

(1) for the claimant's first dependent, the exemption amount multiplied by 1.4;

(2) for the claimant's second dependent, the exemption amount multiplied by 1.3;

(3) for the claimant's third dependent, the exemption amount multiplied by 1.2;

(4) for the claimant's fourth dependent, the exemption amount multiplied by 1.1;

(5) for the claimant's fifth dependent, the exemption amount; and

(6) if the claimant or claimant's spouse was disabled or attained the age of 65 on or before December 31 of the year for which the taxes were levied or rent paid, the exemption amount.

(d)new text begin(1)new text end For purposes of this subdivision, the "exemption amount" means deleted text beginthe exemption amount under section 151(d) of the Internal Revenue Code for the taxable year for which the income is reported; "retirement base amount" means the deductible amount for the taxable year for the claimant and spouse under section 219(b)(5)(A) of the Internal Revenue Code, adjusted for inflation as provided in section 219(b)(5)(C) of the Internal Revenue Code, without regard to whether the claimant or spouse claimed a deduction; and "traditional or Roth style retirement account or plan" means retirement plans under sections 401, 403, 408, 408A, and 457 of the Internal Revenue Code.deleted text endnew text begin: $4,150. For taxable years beginning after December 31, 2018, the commissioner shall annually adjust the $4,150 by the percentage determined pursuant to the provisions of section 1(f) of the Internal Revenue Code, as amended through December 16, 2016, except that in section 1(f)(3)(B), the word "2017" shall be substituted for the word "1992." The exemption amount as adjusted for inflation must be rounded to the nearest $10. The determination of the commissioner under this subdivision is not a rule under the Administrative Procedure Act, including section 14.386; andnew text end

new text begin(2) "retirement base amount" means the deductible amount for the taxable year for the claimant and spouse under section 219(b)(5)(A) of the Internal Revenue Code, adjusted for inflation as provided in section 219(b)(5)(C) of the Internal Revenue Code, without regard to whether the claimant or spouse claimed a deduction, and "traditional or Roth-style retirement account or plan" means retirement plans under sections 401, 403, 408, 408A, and 457 of the Internal Revenue Code.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for property tax refunds based on property taxes payable after December 31, 2018, and rent constituting property taxes payable after December 31, 2017.new text end

Sec. 55.

Subd. 12.

Gross rent.

(a) "Gross rent" means rental paid for the right of occupancy, at arm's length, of a homestead, exclusive of charges for any medical services furnished by the landlord as a part of the rental agreement, whether expressly set out in the rental agreement or not.

(b) The gross rent of a resident of a nursing home or intermediate care facility is $350 per month. The gross rent of a resident of an adult foster care home is $550 per month. Beginning for rent paid in 2002, the commissioner shall annually adjust for inflation the gross rent amounts stated in this paragraph. The adjustment must be made in accordance with section 1(f) of the Internal Revenue Codenew text begin, as amended through December 16, 2016new text end, except that for purposes of this paragraph the percentage increase shall be determined from the year ending on June 30, 2001, to the year ending on June 30 of the year in which the rent is paid. The commissioner shall round the gross rents to the nearest $10 amount. If the amount ends in $5, the commissioner shall round it up to the next $10 amount. The determination of the commissioner under this paragraph is not a rule under the Administrative Procedure Act.

(c) If the landlord and tenant have not dealt with each other at arm's length and the commissioner determines that the gross rent charged was excessive, the commissioner may adjust the gross rent to a reasonable amount for purposes of this chapter.

(d) Any amount paid by a claimant residing in property assessed pursuant to section 273.124, subdivision 3, 4, 5, or 6 for occupancy in that property shall be excluded from gross rent for purposes of this chapter. However, property taxes imputed to the homestead of the claimant or the dwelling unit occupied by the claimant that qualifies for homestead treatment pursuant to section 273.124, subdivision 3, 4, 5, or 6 shall be included within the term "property taxes payable" as defined in subdivision 13, notwithstanding the fact that ownership is not in the name of the claimant.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

Subd. 15.

Internal Revenue Code.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective the day following final enactment, except the changes to household income adopted by the federal changes are effective retroactively at the same time the changes became effective for federal purposes.new text end

Sec. 57.

Subd. 4.

Inflation adjustment.

(a) Beginning for property tax refunds payable in calendar year 2002, the commissioner shall annually adjust the dollar amounts of the income thresholds and the maximum refunds under subdivisions 2 and 2a for inflation. The commissioner shall make the inflation adjustments in accordance with section 1(f) of the Internal Revenue Codenew text begin, as amended through December 16, 2016new text end, except that for purposes of this subdivision the percentage increase shall be determined as provided in this subdivision.

(b) In adjusting the dollar amounts of the income thresholds and the maximum refunds under subdivision 2 for inflation, the percentage increase shall be determined from the year ending on June 30, 2013, to the year ending on June 30 of the year preceding that in which the refund is payable.

(c) In adjusting the dollar amounts of the income thresholds and the maximum refunds under subdivision 2a for inflation, the percentage increase shall be determined from the year ending on June 30, 2013, to the year ending on June 30 of the year preceding that in which the refund is payable.

(d) The commissioner shall use the appropriate percentage increase to annually adjust the income thresholds and maximum refunds under subdivisions 2 and 2a for inflation without regard to whether or not the income tax brackets are adjusted for inflation in that year. The commissioner shall round the thresholds and the maximum amounts, as adjusted to the nearest $10 amount. If the amount ends in $5, the commissioner shall round it up to the next $10 amount.

(e) The commissioner shall annually announce the adjusted refund schedule at the same time provided under section 290.06. The determination of the commissioner under this subdivision is not a rule under the Administrative Procedure Act.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

Sec. 58.

Subdivision 1.

Scope.

Unless the context otherwise clearly requires, the following terms used in this chapter shall have the following meanings:

(1) "Commissioner" means the commissioner of revenue or any person to whom the commissioner has delegated functions under this chapter.

(2) "Federal gross estate" means the gross estate of a decedent as required to be valued and otherwise determined for federal estate tax purposes under the Internal Revenue Code, increased by the value of any property in which the decedent had a qualifying income interest for life and for which an election was made under section 291.03, subdivision 1d, for Minnesota estate tax purposes, but was not made for federal estate tax purposes.

(4) "Minnesota gross estate" means the federal gross estate of a decedent after (a) excluding therefrom any property included in the estate which has its situs outside Minnesota, and (b) including any property omitted from the federal gross estate which is includable in the estate, has its situs in Minnesota, and was not disclosed to federal taxing authorities.

(5) "Nonresident decedent" means an individual whose domicile at the time of death was not in Minnesota.

(6) "Personal representative" means the executor, administrator or other person appointed by the court to administer and dispose of the property of the decedent. If there is no executor, administrator or other person appointed, qualified, and acting within this state, then any person in actual or constructive possession of any property having a situs in this state which is included in the federal gross estate of the decedent shall be deemed to be a personal representative to the extent of the property and the Minnesota estate tax due with respect to the property.

(7) "Resident decedent" means an individual whose domicile at the time of death was in Minnesota. The provisions of section 290.01, subdivision 7, paragraphs (c) and (d), apply to determinations of domicile under this chapter.

(8) "Situs of property" means, with respect to:

(i) real property, the state or country in which it is located;

(ii) tangible personal property, the state or country in which it was normally kept or located at the time of the decedent's death or for a gift of tangible personal property within three years of death, the state or country in which it was normally kept or located when the gift was executed;

(iii) a qualified work of art, as defined in section 2503(g)(2) of the Internal Revenue Code, owned by a nonresident decedent and that is normally kept or located in this state because it is on loan to an organization, qualifying as exempt from taxation under section 501(c)(3) of the Internal Revenue Code, that is located in Minnesota, the situs of the art is deemed to be outside of Minnesota, notwithstanding the provisions of item (ii); and

(iv) intangible personal property, the state or country in which the decedent was domiciled at death or for a gift of intangible personal property within three years of death, the state or country in which the decedent was domiciled when the gift was executed.

For a nonresident decedent with an ownership interest in a pass-through entity with assets that include real or tangible personal property, situs of the real or tangible personal property, including qualified works of art, is determined as if the pass-through entity does not exist and the real or tangible personal property is personally owned by the decedent. If the pass-through entity is owned by a person or persons in addition to the decedent, ownership of the property is attributed to the decedent in proportion to the decedent's capital ownership share of the pass-through entity.

(ii) an entity taxed as a partnership under subchapter K of the Internal Revenue Code;

(iii) a single-member limited liability company or similar entity, regardless of whether it is taxed as an association or is disregarded for federal income tax purposes under Code of Federal Regulations, title 26, section 301.7701-3; or

(iv) a trust to the extent the property is includible in the decedent's federal gross estate; but excludes

(v) an entity whose ownership interest securities are traded on an exchange regulated by the Securities and Exchange Commission as a national securities exchange under section 6 of the Securities Exchange Act, United States Code, title 15, section 78f.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective retroactively for estates of decedents dying after December 31, 2017.new text end

Sec. 59.

Subd. 25.

Sale of property used in a trade or business.

(a) The sale of tangible personal property primarily used in a trade or business is exempt if the sale is not made in the normal course of business of selling that kind of property and if one of the following conditions is satisfied:

(1) the sale occurs in a transaction subject to or described in section 118, 331, 332, 336, 337, 338, 351, 355, 368, 721, 731, 1031, or 1033 of the Internal Revenue Codenew text begin, as amended through December 16, 2016new text end;

(2) the sale is between members of a controlled group as defined in section 1563(a) of the Internal Revenue Code;

(3) the sale is a sale of farm machinery;

(4) the sale is a farm auction sale;

(5) the sale is a sale of substantially all of the assets of a trade or business; or

(6) the total amount of gross receipts from the sale of trade or business property made during the calendar month of the sale and the preceding 11 calendar months does not exceed $1,000.

The use, storage, distribution, or consumption of tangible personal property acquired as a result of a sale exempt under this subdivision is also exempt.

(b) For purposes of this subdivision, the following terms have the meanings given.

(1) A "farm auction" is a public auction conducted by a licensed auctioneer if substantially all of the property sold consists of property used in the trade or business of farming and property not used primarily in a trade or business.

(2) "Trade or business" includes the assets of a separate division, branch, or identifiable segment of a trade or business if, before the sale, the income and expenses attributable to the separate division, branch, or identifiable segment could be separately ascertained from the books of account or record (the lease or rental of an identifiable segment does not qualify for the exemption).

(3) A "sale of substantially all of the assets of a trade or business" must occur as a single transaction or a series of related transactions within the 12-month period beginning on the date of the first sale of assets intended to qualify for the exemption provided in paragraph (a), clause (5).

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective retroactively for sales and purchases made after December 31, 2017.new text end

Sec. 60.

Minnesota Statutes 2016, section 297B.03, is amended to read:

297B.03 EXEMPTIONS.

There is specifically exempted from the provisions of this chapter and from computation of the amount of tax imposed by it the following:

(1) purchase or use, including use under a lease purchase agreement or installment sales contract made pursuant to section 465.71, of any motor vehicle by the United States and its agencies and instrumentalities and by any person described in and subject to the conditions provided in section 297A.67, subdivision 11;

(2) purchase or use of any motor vehicle by any person who was a resident of another state or country at the time of the purchase and who subsequently becomes a resident of Minnesota, provided the purchase occurred more than 60 days prior to the date such person began residing in the state of Minnesota and the motor vehicle was registered in the person's name in the other state or country;

(3) purchase or use of any motor vehicle by any person making a valid election to be taxed under the provisions of section 297A.90;

(4) purchase or use of any motor vehicle previously registered in the state of Minnesota when such transfer constitutes a transfer within the meaning of section 118, 331, 332, 336, 337, 338, 351, 355, 368, 721, 731, 1031, 1033, or 1563(a) of the Internal Revenue Codenew text begin, as amended through December 16, 2016new text end;

(5) purchase or use of any vehicle owned by a resident of another state and leased to a Minnesota-based private or for-hire carrier for regular use in the transportation of persons or property in interstate commerce provided the vehicle is titled in the state of the owner or secured party, and that state does not impose a sales tax or sales tax on motor vehicles used in interstate commerce;

(6) purchase or use of a motor vehicle by a private nonprofit or public educational institution for use as an instructional aid in automotive training programs operated by the institution. "Automotive training programs" includes motor vehicle body and mechanical repair courses but does not include driver education programs;

(7) purchase of a motor vehicle by an ambulance service licensed under section 144E.10when that vehicle is equipped and specifically intended for emergency response or for providing ambulance service;

(8) purchase of a motor vehicle by or for a public library, as defined in section 134.001, subdivision 2, as a bookmobile or library delivery vehicle;

(9) purchase of a ready-mixed concrete truck;

(10) purchase or use of a motor vehicle by a town for use exclusively for road maintenance, including snowplows and dump trucks, but not including automobiles, vans, or pickup trucks;

(11) purchase or use of a motor vehicle by a corporation, society, association, foundation, or institution organized and operated exclusively for charitable, religious, or educational purposes, except a public school, university, or library, but only if the vehicle is:

(i) a truck, as defined in section 168.002, a bus, as defined in section 168.002, or a passenger automobile, as defined in section 168.002, if the automobile is designed and used for carrying more than nine persons including the driver; and

(ii) intended to be used primarily to transport tangible personal property or individuals, other than employees, to whom the organization provides service in performing its charitable, religious, or educational purpose;

(12) purchase of a motor vehicle for use by a transit provider exclusively to provide transit service is exempt if the transit provider is either (i) receiving financial assistance or reimbursement under section 174.24 or 473.384, or (ii) operating under section 174.29, 473.388, or 473.405;

(13) purchase or use of a motor vehicle by a qualified business, as defined in section 469.310, located in a job opportunity building zone, if the motor vehicle is principally garaged in the job opportunity building zone and is primarily used as part of or in direct support of the person's operations carried on in the job opportunity building zone. The exemption under this clause applies to sales, if the purchase was made and delivery received during the duration of the job opportunity building zone. The exemption under this clause also applies to any local sales and use tax;

(14) purchase of a leased vehicle by the lessee who was a participant in a lease-to-own program from a charitable organization that is:

(15) purchase of a motor vehicle used exclusively as a mobile medical unit for the provision of medical or dental services by a federally qualified health center, as defined under title 19 of the Social Security Act, as amended by Section 4161 of the Omnibus Budget Reconciliation Act of 1990.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective retroactively for sales and purchases made after December 31, 2017.new text end

Sec. 61.

Subdivision 1.

Subtraction.

(a) As provided in section 290.0132, subdivision 25, an account holder is allowed a subtraction from deleted text beginthedeleted text end federal deleted text begintaxabledeleted text endnew text begin adjusted grossnew text end income equal to interest or dividends earned on the first-time home buyer savings account during the taxable year.

(b) The subtraction under paragraph (a) is allowed each year for the taxable years including and following the taxable year in which the account was established. No person other than the account holder is allowed a subtraction under this section.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

Sec. 62.

Subd. 2.

Addition.

(a) As provided in section 290.0131, subdivision 14, an account holder must add to federal deleted text begintaxabledeleted text endnew text begin adjusted grossnew text end income the following amounts:

(1) the amount in excess of the total contributions for all taxable years that is withdrawn and used for other than eligible costs, or for a transfer permitted under section 462D.04, subdivision 2; and

(2) the amount remaining in the first-time home buyer savings account at the close of the tenth taxable year that exceeds the total contributions to the account for all taxable years.

(b) For an account that received a transfer under section 462D.04, subdivision 2, the ten-year period under paragraph (a), clause (2), ends at the close of the earliest taxable year that applies to either account under that clause.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

Sec. 63.

Subdivision 1.

Application.

An individual, estate, or trust operating a trade or business in a job opportunity building zone, and an individual, estate, or trust making a qualifying investment in a qualified business operating in a job opportunity building zone qualifies for the exemptions from taxes imposed under chapter 290, as provided in this section. The exemptions provided under this section apply only to the extent that the income otherwise would be taxable under chapter 290. Subtractions under this section from new text beginfederal adjusted gross income, new text endfederal taxable income, alternative minimum taxable income, or any other base subject to tax are limited to the amount that otherwise would be included in the tax base absent the exemption under this section. This section applies only to taxable years beginning during the duration of the job opportunity building zone.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

Sec. 64. new text beginAPPROPRIATIONS.new text end

new text begin$97,000 in fiscal year 2018 and $3,054,000 in fiscal year 2019 are appropriated from the general fund to the commissioner of revenue to administer the provisions of this article. The base for this purpose is $1,631,000 in fiscal year 2020 and $1,447,000 in fiscal year 2021.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective the day following final enactment.new text end

ARTICLE 3

ANGEL TAX CREDIT

Section 1.

Subd. 5.

Credit allowed.

(a)(1) A qualified investor or qualified fund is eligible for a credit equal to 25 percent of the qualified investment in a qualified small business. Investments made by a pass-through entity qualify for a credit only if the entity is a qualified fund. The commissioner must not allocate more than deleted text begin$15,000,000deleted text endnew text begin $10,000,000new text end in credits to qualified investors or qualified funds for taxable years beginning after December 31, deleted text begin2013deleted text endnew text begin 2017new text end, and before January 1, deleted text begin2017, and must not allocate more than $10,000,000 in credits to qualified investors or qualified funds for taxable years beginning after December 31, 2016, and before January 1, 2018deleted text endnew text begin 2019new text end; and

(2) deleted text beginfor taxable years beginning after December 31, 2014, and before January 1, 2018,deleted text end50 percent must be allocated to credits for qualifying investments in qualified greater Minnesota businesses and minority- or women-owned qualified small businesses in Minnesota. Any portion of a taxable year's credits that is reserved for qualifying investments in greater Minnesota businesses and minority- or women-owned qualified small businesses in Minnesota that is not allocated by September 30 of the taxable year is available for allocation to other credit applications beginning on October 1. Any portion of a taxable year's credits that is not allocated by the commissioner does not cancel and may be carried forward to subsequent taxable years until all credits have been allocated.

(b) The commissioner may not allocate more than a total maximum amount in credits for a taxable year to a qualified investor for the investor's cumulative qualified investments as an individual qualified investor and as an investor in a qualified fund; for married couples filing joint returns the maximum is $250,000, and for all other filers the maximum is $125,000. The commissioner may not allocate more than a total of $1,000,000 in credits over all taxable years for qualified investments in any one qualified small business.

(c) The commissioner may not allocate a credit to a qualified investor either as an individual qualified investor or as an investor in a qualified fund if, at the time the investment is proposed:

(1) the investor is an officer or principal of the qualified small business; or

(2) the investor, either individually or in combination with one or more members of the investor's family, owns, controls, or holds the power to vote 20 percent or more of the outstanding securities of the qualified small business.

A member of the family of an individual disqualified by this paragraph is not eligible for a credit under this section. For a married couple filing a joint return, the limitations in this paragraph apply collectively to the investor and spouse. For purposes of determining the ownership interest of an investor under this paragraph, the rules under section 267(c) and 267(e) of the Internal Revenue Code apply.

(d) Applications for tax credits for 2010 must be made available on the department's Web site by September 1, 2010, and the department must begin accepting applications by September 1, 2010. Applications for subsequent years must be made available by November 1 of the preceding year.

(e) Qualified investors and qualified funds must apply to the commissioner for tax credits. Tax credits must be allocated to qualified investors or qualified funds in the order that the tax credit request applications are filed with the department. The commissioner must approve or reject tax credit request applications within 15 days of receiving the application. The investment specified in the application must be made within 60 days of the allocation of the credits. If the investment is not made within 60 days, the credit allocation is canceled and available for reallocation. A qualified investor or qualified fund that fails to invest as specified in the application, within 60 days of allocation of the credits, must notify the commissioner of the failure to invest within five business days of the expiration of the 60-day investment period.

(f) All tax credit request applications filed with the department on the same day must be treated as having been filed contemporaneously. If two or more qualified investors or qualified funds file tax credit request applications on the same day, and the aggregate amount of credit allocation claims exceeds the aggregate limit of credits under this section or the lesser amount of credits that remain unallocated on that day, then the credits must be allocated among the qualified investors or qualified funds who filed on that day on a pro rata basis with respect to the amounts claimed. The pro rata allocation for any one qualified investor or qualified fund is the product obtained by multiplying a fraction, the numerator of which is the amount of the credit allocation claim filed on behalf of a qualified investor and the denominator of which is the total of all credit allocation claims filed on behalf of all applicants on that day, by the amount of credits that remain unallocated on that day for the taxable year.

(g) A qualified investor or qualified fund, or a qualified small business acting on their behalf, must notify the commissioner when an investment for which credits were allocated has been made, and the taxable year in which the investment was made. A qualified fund must also provide the commissioner with a statement indicating the amount invested by each investor in the qualified fund based on each investor's share of the assets of the qualified fund at the time of the qualified investment. After receiving notification that the investment was made, the commissioner must issue credit certificates for the taxable year in which the investment was made to the qualified investor or, for an investment made by a qualified fund, to each qualified investor who is an investor in the fund. The certificate must state that the credit is subject to revocation if the qualified investor or qualified fund does not hold the investment in the qualified small business for at least three years, consisting of the calendar year in which the investment was made and the two following years. The three-year holding period does not apply if:

(1) the investment by the qualified investor or qualified fund becomes worthless before the end of the three-year period;

(2) 80 percent or more of the assets of the qualified small business is sold before the end of the three-year period;

(3) the qualified small business is sold before the end of the three-year period;

(4) the qualified small business's common stock begins trading on a public exchange before the end of the three-year period; or

(5) the qualified investor dies before the end of the three-year period.

(h) The commissioner must notify the commissioner of revenue of credit certificates issued under this section.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

ARTICLE 4

CORPORATE TAX REFORM

Section 1.

Subd. 2.

Powers.

(a) In addition to the collection remedies available to private collection agencies in this state, the commissioner, with legal assistance from the attorney general, may utilize any statutory authority granted to a referring agency for purposes of collecting debt owed to that referring agency. The commissioner may also use the tax collection remedies in sections 270C.03, subdivision 1, clause deleted text begin(8)deleted text endnew text begin (9)new text end, 270C.31, 270C.32, 270C.52, subdivisions 2 and 3, 270C.63, 270C.65, and 270C.67 to 270C.72. A debtor may take advantage of any administrative or appeal rights contained in the listed sections. For administrative and appeal rights for nontax debts, references to administrative appeals or to the taxpayer rights advocate shall be construed to be references to the case reviewer, references to Tax Court shall be construed to mean district court, and offers in compromise shall be submitted to the referring agency. A debtor who qualifies for cancellation of collection costs under section 16D.11, subdivision 3, clause (1), can apply to the commissioner for reduction or release of a continuous wage levy, if the debtor establishes that the debtor needs all or a portion of the wages being levied upon to pay for essential living expenses, such as food, clothing, shelter, medical care, or expenses necessary for maintaining employment. The commissioner's determination not to reduce or release a continuous wage levy is appealable to district court. The word "tax" or "taxes" when used in the tax collection statutes listed in this subdivision also means debts referred under this chapter.

(b) Before using the tax collection remedies listed in this subdivision, notice and demand for payment of the amount due must be given to the person liable for the payment or collection of the debt at least 30 days prior to the use of the remedies. The notice must be sent to the person's last known address and must include a brief statement that sets forth in simple and nontechnical terms the amount and source of the debt, the nature of the available collection remedies, and remedies available to the debtor.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

Sec. 2.

Subdivision 1.

Powers and duties.

The commissioner shall have and exercise the following powers and duties:

(1) administer and enforce the assessment and collection of taxes;

(2) make determinations, corrections, and assessments with respect to taxes, including interest, additions to taxes, and assessable penalties;

new text begin(3) disallow the tax effects of a transaction that does not have economic substance;new text end

deleted text begin(3)deleted text endnew text begin (4)new text end use statistical or other sampling techniques consistent with generally accepted auditing standards in examining returns or records and making assessments;

deleted text begin(4)deleted text endnew text begin (5)new text end investigate the tax laws of other states and countries, and formulate and submit to the legislature such legislation as the commissioner may deem expedient to prevent evasions of state revenue laws and to secure just and equal taxation and improvement in the system of state revenue laws;

deleted text begin(5)deleted text endnew text begin (6)new text end consult and confer with the governor upon the subject of taxation, the administration of the laws in regard thereto, and the progress of the work of the department, and furnish the governor, from time to time, such assistance and information as the governor may require relating to tax matters;

deleted text begin(6)deleted text endnew text begin (7)new text end execute and administer any agreement with the secretary of the treasury or the Bureau of Alcohol, Tobacco, Firearms and Explosives in the Department of Justice of the United States or a representative of another state regarding the exchange of information and administration of the state revenue laws;

deleted text begin(7)deleted text endnew text begin (8)new text end require town, city, county, and other public officers to report information as to the collection of taxes received from licenses and other sources, and such other information as may be needful in the work of the commissioner, in such form as the commissioner may prescribe;

deleted text begin(9)deleted text endnew text begin (10)new text end authorize the participation in audits performed by the Multistate Tax Commission. For the purposes of chapter 270B, the Multistate Tax Commission will be considered to be a state for the purposes of auditing corporate sales, excise, and income tax returns;

new text beginEFFECTIVE DATE.new text end

Sec. 3.

Subd. 6.

Assessment presumed valid.

new text begin(a) new text endA return or assessment of tax made by the commissioner is prima facie correct and valid. The taxpayer has the burden of establishing its incorrectness or invalidity in any related action or proceeding.

new text begin(b) To overcome the presumption that an order of the commissioner that disallows the tax effects of a transaction because the commissioner determined the transaction does not have economic substance pursuant to section 270C.03, subdivision l, clause (3), is prima facie correct and valid, the taxpayer must prove with clear and convincing evidence that the transaction has economic substance.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

Sec. 4.

new text begin[270C.331] PREVENTING TAX EVASION.new text end

new text beginSubdivision 1.new text end

new text beginEconomic substance.new text end

new text begin(a) For purposes of disallowing the tax effects of a transaction that does not have economic substance pursuant to section 270C.03, subdivision l, clause (3), a transaction shall be treated as having economic substance only if:new text end

new text begin(1) the transaction changes in a meaningful way, apart from tax effects, the taxpayer's economic position; andnew text end

new text begin(2) the taxpayer has a substantial purpose, apart from tax effects, for entering into the transaction.new text end

new text begin(b) In determining whether the requirements of paragraph (a), clauses (1) and (2), are met, the potential for profit of a transaction shall be taken into account only if the present value of the reasonable expected pretax profit from the transaction is substantial in relation to the present value of the expected net tax benefits that would be allowed if the transaction was respected. Fees and other transaction expenses shall be taken into account as expenses in determining pretax profit.new text end

new text begin(c) For purposes of paragraph (a), clause (2), achieving a financial accounting benefit shall not be taken into account as a purpose for entering into a transaction if the origin of such financial accounting benefit is a reduction of federal, state, or local tax.new text end

new text beginSubd. 2.new text end

new text beginApart from tax effects.new text end

new text beginFor purposes of this section, "apart from tax effects" means apart from the state and local tax effects arising from the application of the laws of any state or local unit of government to the form of the transaction, the federal tax effects resulting from the transaction, or both.new text end

new text beginSubd. 3.new text end

new text beginTransaction.new text end

new text beginFor purposes of this section and section 270C.03, subdivision l, clause (3), "transaction" includes a series of transactions.new text end

new text beginSubd. 4.new text end

new text beginPersonal transactions of individuals.new text end

new text beginIn the case of an individual, subdivision 1 applies only to transactions entered into in connection with a trade or business or an activity engaged in for the production of income.new text end

new text beginSubd. 5.new text end

new text beginCommissioner to issue guidance.new text end

new text begin(a) The commissioner shall promulgate guidance on how the provisions of this section will be applied. The guidance must include, at a minimum, examples of transactions that will not be challenged as not having economic substance and examples of transactions that may be challenged as not having economic substance.new text end

new text begin(b) The commissioner shall establish and publish a formal departmental procedure for uniform application of this section, except the publishing of such procedure is subject to limitations of protected nonpublic data in section 270B.02.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

Sec. 5.

Minnesota Statutes 2016, section 289A.60, is amended by adding a subdivision to read:

new text beginSubd. 27a.new text end

new text begin(a) If the tax effects of a transaction are disallowed pursuant to section 270C.03, subdivision 1, clause (3), a penalty equal to 20 percent of the amount of the disclosed noneconomic substance transaction understatement must be added to the tax. This subdivision applies to any income or item that is attributable to any transaction disallowed pursuant to section 270C.03, subdivision 1, clause (3).new text end

new text begin(b) If the tax effects of a transaction are disallowed pursuant to section 270C.03, subdivision l, clause (3), a penalty equal to 40 percent of the amount of the nondisclosed noneconomic substance transaction understatement must be added to the tax. This subdivision applies to any income or item that is attributable to any transaction disallowed pursuant to section 270C.03, subdivision 1, clause (3).new text end

new text begin(c) For purposes of this subdivision, "disclosed noneconomic substance transaction" means a transaction that fails to meet the criteria for having economic substance as described in section 270C.03, subdivision 1, clause (3), with respect to which the relevant facts affecting the tax treatment are adequately disclosed in the return or in a statement attached to the return.new text end

new text begin(d) For purposes of this subdivision, "nondisclosed noneconomic substance transaction" means a transaction that fails to meet the criteria for having economic substance as described in section 270C.03, subdivision 1, clause (3), with respect to which the relevant facts affecting the tax treatment are not adequately disclosed in the return nor in a statement attached to the return.new text end

new text begin(e) In no event shall any amendment or supplement to a tax return be taken into account for purposes of this subdivision to reduce the noneconomic substance transaction understatement if the amendment or supplement is filed after the date the taxpayer is first contacted by the commissioner regarding examination of the return.new text end

new text begin(f) For purposes of this subdivision, "understatement" means the product of:new text end

new text begin(1) the amount of the increase, if any, in taxable income that results from a difference between the proper tax treatment of an item to which section 270C.03, subdivision 1, clause (3), applies and the taxpayer's treatment of that item as shown on the taxpayer's tax return. For purposes of this clause, any reduction of the excess of deductions allowed for the taxable year over gross income for that year, and any reduction in the amount of capital losses that would, without regard to section 1211 of the Internal Revenue Code, be allowed for that year, must be treated as an increase in taxable income; andnew text end

new text begin(2) the highest rate of tax imposable on the taxpayer under section 290.06 determined without regard to the understatement.new text end

new text begin(g) If the noneconomic substance transaction understatement penalty is imposed under this subdivision, the noneconomic substance transaction understatement penalty applies in lieu of the penalties imposed under subdivision 27.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

Sec. 6.

Subd. 2.

Definitions.

For purposes of this section, the following terms have the meanings given.

(a) "Qualified research expenses" means (i) qualified research expenses and basic research payments as defined in section 41(b) and (e) of the Internal Revenue Code, except it does not include expenses incurred for qualified research or basic research conducted outside the state of Minnesota pursuant to section 41(d) and (e) of the Internal Revenue Code; and (ii) contributions to a nonprofit corporation established and operated pursuant to the provisions of chapter 317A for the purpose of promoting the establishment and expansion of business in this state, provided the contributions are invested by the nonprofit corporation for the purpose of providing funds for small, technologically innovative enterprises in Minnesota during the early stages of their development.

(b) "Qualified research" means qualified research as defined in section 41(d) of the Internal Revenue Code, except that the term does not include qualified research conducted outside the state of Minnesota.

(c) "Base amount" means base amount as defined in section 41(c) of the Internal Revenue Code, except that the average annual gross receipts and aggregate gross receipts must be calculated using Minnesota sales or receipts under section 290.191 and the definitions contained in paragraphs (a) and (b) shall apply.new text begin If there are inadequate records, or the records are unavailable to compute or verify the base percentage, a fixed base percentage of 16 percent must be used.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

(b) Sales of tangible personal property are made within this state if the property is received by a purchaser at a point within this state, regardless of the f.o.b. point, other conditions of the sale, or the ultimate destination of the property.

(c) Tangible personal property delivered to a common or contract carrier or foreign vessel for delivery to a purchaser in another state or nation is a sale in that state or nation, regardless of f.o.b. point or other conditions of the sale.

(d) Notwithstanding paragraphs (b) and (c), when intoxicating liquor, wine, fermented malt beverages, cigarettes, or tobacco products are sold to a purchaser who is licensed by a state or political subdivision to resell this property only within the state of ultimate destination, the sale is made in that state.

(e) Sales made by or through a corporation that is qualified as a domestic international sales corporation under section 992 of the Internal Revenue Code are not considered to have been made within this state.

(f) Sales, rents, royalties, and other income in connection with real property is attributed to the state in which the property is located.

(g) Receipts from the lease or rental of tangible personal property, including finance leases and true leases, must be attributed to this state if the property is located in this state and to other states if the property is not located in this state. Receipts from the lease or rental of moving property including, but not limited to, motor vehicles, rolling stock, aircraft, vessels, or mobile equipment are included in the numerator of the receipts factor to the extent that the property is used in this state. The extent of the use of moving property is determined as follows:

(1) A motor vehicle is used wholly in the state in which it is registered.

(2) The extent that rolling stock is used in this state is determined by multiplying the receipts from the lease or rental of the rolling stock by a fraction, the numerator of which is the miles traveled within this state by the leased or rented rolling stock and the denominator of which is the total miles traveled by the leased or rented rolling stock.

(3) The extent that an aircraft is used in this state is determined by multiplying the receipts from the lease or rental of the aircraft by a fraction, the numerator of which is the number of landings of the aircraft in this state and the denominator of which is the total number of landings of the aircraft.

(4) The extent that a vessel, mobile equipment, or other mobile property is used in the state is determined by multiplying the receipts from the lease or rental of the property by a fraction, the numerator of which is the number of days during the taxable year the property was in this state and the denominator of which is the total days in the taxable year.

(h) Royalties and other income received for the use of or for the privilege of using intangible property, including patents, know-how, formulas, designs, processes, patterns, copyrights, trade names, service names, franchises, licenses, contracts, customer lists, or similar items, must be attributed to the state in which the property is used by the purchaser. If the property is used in more than one state, the royalties or other income must be apportioned to this state pro rata according to the portion of use in this state. If the portion of use in this state cannot be determined, the royalties or other income must be excluded from both the numerator and the denominator. Intangible property is used in this state if the purchaser uses the intangible property or the rights therein in the regular course of its business operations in this state, regardless of the location of the purchaser's customers.

(i) Sales of intangible property are made within the state in which the property is used by the purchaser. If the property is used in more than one state, the sales must be apportioned to this state pro rata according to the portion of use in this state. If the portion of use in this state cannot be determined, the sale must be excluded from both the numerator and the denominator of the sales factor. Intangible property is used in this state if the purchaser used the intangible property in the regular course of its business operations in this state.

(j) Receipts from the performance of services must be attributed to the state where the services are received. For the purposes of this section, receipts from the performance of services provided to a corporation, partnership, or trust may only be attributed to a state where it has a fixed place of doing business. If the state where the services are received is not readily determinable or is a state where the corporation, partnership, or trust receiving the service does not have a fixed place of doing business, the services shall be deemed to be received at the location of the office of the customer from which the services were ordered in the regular course of the customer's trade or business. If the ordering office cannot be determined, the services shall be deemed to be received at the office of the customer to which the services are billed.

(k) For the purposes of this subdivision and subdivision 6, paragraph (l), receipts from management, distribution, or administrative services performed by a new text beginperson or new text endcorporation deleted text beginor trustdeleted text end for a fund of a new text beginperson or new text endcorporation deleted text beginor trustdeleted text end regulated under United States Code, title 15, deleted text beginsections 80a-1 through 80a-64deleted text endnew text begin chapter 2D, subchapter Inew text end, must be attributed to the state where the shareholder of the fund resides. Under this paragraph, receipts for services attributed to shareholders are determined on the basis of the ratio of: (1) the average of the outstanding shares in the fund owned by shareholders residing within Minnesota at the beginning and end of each year; and (2) the average of the total number of outstanding shares in the fund at the beginning and end of each year. Residence of the shareholder, in the case of an individual, is determined by the mailing address furnished by the shareholder to the fund. Residence of the shareholder, when the shares are held by an insurance company as a depositor for the insurance company policyholders, is the mailing address of the policyholders. In the case of an insurance company holding the shares as a depositor for the insurance company policyholders, if the mailing address of the policyholders cannot be determined by the taxpayer, the receipts must be excluded from both the numerator and denominator. Residence of other shareholders is the mailing address of the shareholder.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

Sec. 8.

Subd. 4.

Dividends received from another corporation.

(a)(1) Eighty percent of dividends received by a corporation during the taxable year from another corporation, in which the recipient owns 20 percent or more of the stock, by vote and value, not including stock described in section 1504(a)(4) of the Internal Revenue Code when the corporate stock with respect to which dividends are paid does not constitute the stock in trade of the taxpayer or would not be included in the inventory of the taxpayer, or does not constitute property held by the taxpayer primarily for sale to customers in the ordinary course of the taxpayer's trade or business, or when the trade or business of the taxpayer does not consist principally of the holding of the stocks and the collection of the income and gains therefrom; and

(2)(i) the remaining 20 percent of dividends if the dividends received are the stock in an affiliated company transferred in an overall plan of reorganization and the dividend is eliminated in consolidation under Treasury Department Regulation 1.1502-14(a), as amended through December 31, 1989;

(ii) the remaining 20 percent of dividends if the dividends are received from a corporation which is subject to tax under section 290.36 and which is a member of an affiliated group of corporations as defined by the Internal Revenue Code and the dividend is eliminated in consolidation under Treasury Department Regulation 1.1502-14(a), as amended through December 31, 1989, or is deducted under an election under section 243(b) of the Internal Revenue Code; or

(iii) the remaining 20 percent of the dividends if the dividends are received from a property and casualty insurer as defined under section 60A.60, subdivision 8, which is a member of an affiliated group of corporations as defined by the Internal Revenue Code and either: (A) the dividend is eliminated in consolidation under Treasury Regulation 1.1502-14(a), as amended through December 31, 1989; or (B) the dividend is deducted under an election under section 243(b) of the Internal Revenue Code.

(b) Seventy percent of dividends received by a corporation during the taxable year from another corporation in which the recipient owns less than 20 percent of the stock, by vote or value, not including stock described in section 1504(a)(4) of the Internal Revenue Code when the corporate stock with respect to which dividends are paid does not constitute the stock in trade of the taxpayer, or does not constitute property held by the taxpayer primarily for sale to customers in the ordinary course of the taxpayer's trade or business, or when the trade or business of the taxpayer does not consist principally of the holding of the stocks and the collection of income and gain therefrom.

(c) The dividend deduction provided in this subdivision shall be allowed only with respect to dividends that are included in a corporation's Minnesota taxable net income for the taxable year.

The dividend deduction provided in this subdivision does not apply to a dividend from a corporation which, for the taxable year of the corporation in which the distribution is made or for the next preceding taxable year of the corporation, is a corporation exempt from tax under section 501 of the Internal Revenue Code.

The dividend deduction provided in this subdivision does not apply to a dividend received from a real estate investment trust as defined in section 856 of the Internal Revenue Code.

The dividend deduction provided in this subdivision applies to the amount of regulated investment company dividends only to the extent determined under section 854(b) of the Internal Revenue Code.

The dividend deduction provided in this subdivision shall not be allowed with respect to any dividend for which a deduction is not allowed under the provisions of section 246(c)new text beginor 246Anew text end of the Internal Revenue Code.

(d) If dividends received by a corporation that does not have nexus with Minnesota under the provisions of Public Law 86-272 are included as income on the return of an affiliated corporation permitted or required to file a combined report under section 290.17, subdivision 4, or 290.34, subdivision 2, then for purposes of this subdivision the determination as to whether the trade or business of the corporation consists principally of the holding of stocks and the collection of income and gains therefrom shall be made with reference to the trade or business of the affiliated corporation having a nexus with Minnesota.

(e) The deduction provided by this subdivision does not apply if the dividends are paid by a FSC as defined in section 922 of the Internal Revenue Code.

(f) If one or more of the members of the unitary group whose income is included on the combined report received a dividend, the deduction under this subdivision for each member of the unitary business required to file a return under this chapter is the product of: (1) 100 percent of the dividends received by members of the group; (2) the percentage allowed pursuant to paragraph (a) or (b); and (3) the percentage of the taxpayer's business income apportionable to this state for the taxable year under section 290.191 or 290.20.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

Sec. 9.

Subd. 42.

Qualified data centers.

(a) new text beginThe following purchases of enterprise information technology equipment and computer software are exempt:new text end

new text begin(1) new text endpurchases of enterprise information technology equipment deleted text beginand computer softwaredeleted text endnew text begin, and replacements or upgrades to the equipment,new text end for use in a qualified data center, or a qualified refurbished data centerdeleted text begin, are exempt, except that computer softwaredeleted text endnew text begin;new text end

new text begin(2) purchases of computer software, and replacements or upgrades to the software, that exclusively operates, maintains, or monitors the enterprise information technology equipment exempted by clause (1);new text end

new text begin(3) for a constructed qualified data center, where the total cost of construction and investment in enterprise information technology equipment and computer software is at least $200,000,000 within a 48-month period, purchases of computer software, and replacements or upgrades to the software, that manages, manipulates, analyzes, collects, stores, processes, distributes, or allows access to large amounts of data, or any other similar functions related to the data, at the data center. The exemption in this clause applies only to constructed qualified data centers, and not to data centers that are refurbished, substantially refurbished, rebuilt, or modified; andnew text end

The tax on purchases exempt under this paragraph must be imposed and collected as if the rate under section 297A.62, subdivision 1, applied, and then refunded after June 30, 2013, in the manner provided in section 297A.75. deleted text beginThis exemption includes enterprise information technology equipment and computer software purchased to replace or upgrade enterprise information technology equipment and computer software in a qualified data center, or a qualified refurbished data center.deleted text end

(b) Electricity used or consumed in the operation of a qualified data center or qualified refurbished data center is exempt.

(c) For purposes of this subdivision, "qualified data center" means a facility in Minnesota:

(1) that is comprised of one or more buildings that consist in the aggregate of at least 25,000 square feet, and that are located on a single parcel or on contiguous parcels, where the total cost of construction or refurbishment, investment in enterprise information technology equipment, and computer software is at least $30,000,000 within a 48-month period. The 48-month period begins no sooner than July 1, 2012, except that costs for computer software maintenance agreements purchased before July 1, 2013, are not included in determining if the $30,000,000 threshold has been met;

(2) that is constructed or substantially refurbished after June 30, 2012, where "substantially refurbished" means that at least 25,000 square feet have been rebuilt or modified, including:

(3) that is used to house enterprise information technology equipment, where the facility has the following characteristics:

(i) uninterruptible power supplies, generator backup power, or both;

(ii) sophisticated fire suppression and prevention systems; and

(iii) enhanced security. A facility will be considered to have enhanced security if it has restricted access to the facility to selected personnel; permanent security guards; video camera surveillance; an electronic system requiring pass codes, keycards, or biometric scans, such as hand scans and retinal or fingerprint recognition; or similar security features.

In determining whether the facility has the required square footage, the square footage of the following spaces shall be included if the spaces support the operation of enterprise information technology equipment: office space, meeting space, and mechanical and other support facilities. For purposes of this subdivision, "computer software" includes, but is not limited to, software utilized or loaded at a qualified data center or qualified refurbished data center, including maintenance, licensing, and software customization.

(d) For purposes of this subdivision, a "qualified refurbished data center" means an existing facility that qualifies as a data center under paragraph (c), clauses (2) and (3), but that is comprised of one or more buildings that consist in the aggregate of at least 25,000 square feet, and that are located on a single parcel or contiguous parcels, where the total cost of construction or refurbishment, investment in enterprise information technology equipment, and computer software is at least $50,000,000 within a 24-month period.

(e) For purposes of this subdivision, "enterprise information technology equipment" means computers and equipment supporting computing, networking, or data storage, including servers and routers. It includes, but is not limited to: cooling systems, cooling towers, and other temperature control infrastructure; power infrastructure for transformation, distribution, or management of electricity used for the maintenance and operation of a qualified data center or qualified refurbished data center, including but not limited to exterior dedicated business-owned substations, backup power generation systems, battery systems, and related infrastructure; and racking systems, cabling, and trays, which are necessary for the maintenance and operation of the qualified data center or qualified refurbished data center.

(f) A qualified data center or qualified refurbished data center may claim the exemptions in this subdivision for purchases made either within 20 years of the date of its first purchase qualifying for the exemption under paragraph (a), or by June 30, 2042, whichever is earlier.

(g) The purpose of this exemption is to create jobs in the construction and data center industries.

(h) This subdivision is effective for sales and purchases made before July 1, 2042.

(i)(1) The commissioner of employment and economic development must certify to the commissioner of revenue, in a format approved by the commissioner of revenue, when a qualified data center has met the requirements under paragraph (c) or a qualified refurbished data center has met the requirements under paragraph (d). The certification must provide the following information regarding each qualified data center or qualified refurbished data center:

(i) the total square footage amount;

(ii) the total amount of construction or refurbishment costs and the total amount of qualifying investments in enterprise information technology equipment and computer software; and

(iii) the beginning and ending of the applicable period under either paragraph (c) or (d) in which the qualifying expenditures and purchases under item (ii) were made, but in no case shall the period begin before July 1, 2012;

(2) Any refund for sales tax paid on qualifying purchases under this subdivision must not be issued unless the commissioner of revenue has received the certification required under clause (1) either from the commissioner of employment and economic development or the qualified data center or qualified refurbished data center claiming the refund; and

(3) The commissioner of employment and economic development must annually notify the commissioner of revenue of the qualified data centers that are projected to meet the requirements under paragraph (c) and the qualified refurbished data centers that are projected to meet the requirements under paragraph (d) in each of the next four years. The notification must provide the information required under clause (1), items (i) to (iii), for each qualified data center or qualified refurbished data center.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for sales and purchases made after June 30, 2018.new text end

Sec. 10.

Subd. 7.

Nonadmitted insurance premium tax.

(a) A tax is imposed on surplus lines brokers. The rate of tax is equal to three percent of the gross premiums less return premiums paid by an insured whose home state is Minnesota.

(b) A tax is imposed on a person, firm, corporation, or purchasing group as defined in section 60E.02, or any member of a purchasing group, that procures insurance directly from a nonadmitted insurer. The rate of tax is equal to deleted text begintwodeleted text endnew text begin threenew text end percent of the gross premiums less return premiums paid by an insured whose home state is Minnesota.

(c) No state other than the home state of an insured may require any premium tax payment for nonadmitted insurance. When Minnesota is the home state of the insured, as provided under section 297I.01, 100 percent of the gross premiums are taxable in Minnesota with no allocation of the tax to other states.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for nonadmitted insurance policies that go into effect after December 31, 2018.new text end

ARTICLE 5

TOBACCO TAX MODIFICATIONS

Section 1.

Subdivision 1.

Notice of revocation; hearings.

(a) Ifdeleted text begin: (1)deleted text end a person fails to comply with chapter 297A or the sales and use tax provisions of chapter 289A or the rules related to sales tax, deleted text beginor (2) any retailer purchases for resale from an unlicensed seller more than 20,000 cigarettes or $500 or more worth of tobacco products, without reasonable cause,deleted text end the commissioner may give the person 30 days' notice in writing, specifying the violations, and stating that based on the violations the commissioner intends to revoke the person's permit issued under section 297A.84. The notice must also advise the person of the right to contest the revocation under this subdivision. It must also explain the general procedures for a contested case hearing under chapter 14. The notice may be served personally or by mail in the manner prescribed for service of an order of assessment.

(b) If the person does not request a hearing within 30 days after the date of the notice of intent, the commissioner may serve a notice of revocation of permit upon the person, and the permit is revoked. If a hearing is timely requested, and held, the permit is revoked after the commissioner serves an order of revocation of permit under section 14.62, subdivision 1.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective August 1, 2018.new text end

Sec. 2.

Minnesota Statutes 2016, section 270C.728, is amended by adding a subdivision to read:

new text beginSubd. 8.new text end

new text beginPublication of revoked retail cigarette licenses.new text end

new text begin(a) Notwithstanding any other law, the commissioner may publish a list of persons who have had their retail licenses to sell cigarettes or tobacco products revoked under section 297F.186. In the case of a license holder that is a business entity, the commissioner may also publish the name of responsible persons of the license holder, as defined in section 297F.186, subdivision 1.new text end

new text begin(b) At least 30 days before publishing the name of a license holder or responsible person, the commissioner shall mail a written notice to the license holder and to responsible persons of the license holder of the commissioner's intent to publish. This notice may be included as part of the notice of intent to revoke a license as required under section 297F.186, subdivision 3.new text end

new text begin(c) The list may be published by any medium or method. The list must contain the name and address of the license holder and name of the responsible person and the date the license was revoked.new text end

new text begin(d) The commissioner shall remove the name of a license holder or responsible person from the list five years from the date of the license revocation or upon the license holder or responsible person receiving a license clearance under section 297F.186.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective August 1, 2018.new text end

Sec. 3.

Minnesota Statutes 2016, section 297F.01, is amended by adding a subdivision to read:

new text beginSubd. 6a.new text end

new text beginConsumable material.new text end

new text begin"Consumable material" means any liquid nicotine solution or other material containing nicotine that is depleted as a vapor product is used.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective January 1, 2019.new text end

Sec. 4.

Minnesota Statutes 2016, section 297F.01, is amended by adding a subdivision to read:

new text beginSubd. 7a.new text end

new text beginConsumer packaging.new text end

new text begin"Consumer packaging" means any container of vapor product that is of an appropriate size for sale to a consumer.new text end

new text beginEFFECTIVE DATE.new text end

Sec. 5.

Subd. 9a.

Invoice.

"Invoice" means a detailed list of cigarettes and tobacco products purchased or sold in this state that contains the following information:

(1) name of seller;

(2) name of purchaser;

(3) date of sale;

(4) invoice number;

(5) itemized list of goods sold including brands of cigarettes and number of cartons of each brand, unit price, and identification of tobacco products by name, quantity, and unit price; deleted text beginanddeleted text end

new text beginEFFECTIVE DATE.new text end

Sec. 8.

Subd. 14.

Retailer.

"Retailer" means a person deleted text beginrequired to be licensed under chapter 461deleted text endnew text beginlocated in this state new text endengaged deleted text beginin this statedeleted text end in the business of selling, or offering to sell, cigarettes or tobacco products to consumers.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective August 1, 2018.new text end

Sec. 9.

Minnesota Statutes 2016, section 297F.01, is amended by adding a subdivision to read:

new text beginSubd. 16a.new text end

new text beginSales price of vapor products.new text end

new text begin(a) "Sales price of vapor products" means the price at which a distributor or retailer purchases a vapor product or the price at which a subjobber purchases vapor products from a manufacturer of vapor products.new text end

new text begin(b) For the purposes of section 297F.05, subdivision 3b, paragraph (a), clause (5), "sales price of vapor product" means the price at which the manufacturer sells the product minus a retailer markup equal to ten percent of that price.new text end

new text begin(c) If a vapor product described in section 297F.01, subdivision 22b, paragraph (b), includes a cartridge, bottle, or other package of nicotine solution which is available for purchase as a separate item by the distributor, retailer, subjobber, or consumer, then the price at which the vapor product is purchased or sold for purposes of paragraphs (a) and (b) is limited to the usual price, without regard to any discount or reduction, at which the cartridge, bottle, or other package of nicotine solution is separately sold to a distributor, retailer, subjobber, or consumer.new text end

new text begin(d) Sales price of vapor products includes the applicable federal excise tax, freight charges, and packaging costs, regardless of whether they were included in the purchase price, but does not include the tax imposed under section 297F.05, subdivision 3b.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for vapor products subject to tax after December 31, 2018.new text end

Sec. 10.

Subd. 17.

Stamp.

"Stamp" means the adhesive stamp supplied by the commissioner of revenue for use on cigarette packages new text beginor packages of moist snuff or other tobacco products new text endor any other indicia adopted by the commissioner to indicate that the tax has been paid.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective July 1, 2020.new text end

Sec. 11.

Subd. 19.

Tobacco products.

(a) "Tobacco products" means any product containing, made, or derived from tobacco that is intended for human consumption, whether chewed, smoked, absorbed, dissolved, inhaled, snorted, sniffed, or ingested by any other means, or any component, part, or accessory of a tobacco product, including, but not limited to, cigars; cheroots; stogies; periques; granulated, plug cut, crimp cut, ready rubbed, and other smoking tobacco; snuff; snuff flour; cavendish; plug and twist tobacco; fine-cut and other chewing tobacco; shorts; refuse scraps, clippings, cuttings and sweepings of tobacco, and other kinds and forms of tobacco; but does not include cigarettes as defined in this section.new text begin Tobacco products includes vapor products.new text end Tobacco products excludes any tobacco product that has been approved by the United States Food and Drug Administration for sale as a tobacco cessation product, as a tobacco dependence product, or for other medical purposes, and is being marketed and sold solely for such an approved purpose.

(b) Except for the imposition of tax under section 297F.05, subdivisions 3 and 4, tobacco products includes a premium cigar, as defined in subdivision 13a.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective the day following final enactment.new text end

Subd. 20.

Tobacco products distributor.

(1) a person engaged in the business of selling tobacco products in this state who brings, or causes to be brought, into this state from outside the state any tobacco products for sale;new text beginornew text end

(2) deleted text begina person who makes, manufactures, or fabricates tobacco products in this state for sale in this state;deleted text end

deleted text begin(3)deleted text end a person engaged in the business of selling tobacco products outside this state who ships or transports tobacco products to retailers in this state, to be sold by those retailers.

new text begin(b) "Tobacco products distributor" includes a person who makes, manufactures, or fabricates tobacco products, other than vapor products, in this state for sale in this state.new text end

new text begin(c) "Tobacco products distributor" includes a manufacturer of vapor products only to the extent that the manufacturer brings tobacco products into this state for use other than in manufacturing vapor products.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective January 1, 2019.new text end

Sec. 13.

Subd. 21.

Tobacco products subjobber.

"Tobacco products subjobber" meansnew text begin:new text end

new text begin(1)new text end a person, other than a manufacturer or distributor, who buysnew text begin,new text end from a new text beginmanufacturer of vapor products or a new text enddistributornew text begin,new text end tobacco products upon which the tax imposed by this chapter has been paid and sells them to persons other than the ultimate consumersdeleted text begin,deleted text endnew text begin ;new text end and

new text begin(2)new text end any licensed distributor who delivers, sells, or distributes tobacco products upon which the tax imposed by this chapter has been paid from a place of business other than that licensed in the distributor's license.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective January 1, 2019.new text end

Sec. 14.

Minnesota Statutes 2016, section 297F.01, is amended by adding a subdivision to read:

new text beginSubd. 22b.new text end

new text beginVapor products.new text end

new text begin(a) "Vapor products" means any cartridge, bottle, or other package that contains nicotine made or derived from tobacco, that is in a solution that is consumed, or meant to be consumed, through the use of a heating element, power source, electronic circuit, or other electronic, chemical, or mechanical means that produces vapor from the nicotine. This paragraph expires December 31, 2018.new text end

new text begin(b) Beginning January 1, 2019, "vapor products" means any cartridge, bottle, or other package that contains nicotine, including nicotine produced from sources other than tobacco, that is in a solution that is consumed, or meant to be consumed, through the use of a heating element, power source, electronic circuit, or other electronic, chemical, or mechanical means that produces vapor from the nicotine.new text end

new text begin(c) Vapor products includes any electronic cigarette, electronic cigar, electronic cigarillo, electronic pipe, or similar product or device, and any batteries, heating elements, or other components, parts, or accessories sold with and meant to be used in the consumption of the nicotine solution.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective the day following final enactment.new text end

Sec. 15.

Subdivision 1.

Selling without license illegal.

No person shall engage in the business of anew text begin manufacturer of vapor products,new text end distributornew text begin,new text end or subjobber at any place of business without first having received a license from the commissioner to engage in that business at that place of business.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective January 1, 2019.new text end

Sec. 16.

Subd. 2.

Form of application.

Every application for a cigarette deleted text beginordeleted text endnew text begin,new text end tobacco productsnew text begin, or manufacturer of vapor productsnew text end license shall be made on a form prescribed by the commissioner.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective January 1, 2019.new text end

Sec. 17.

Subd. 3.

Place of application.

A separate application for a distributor's license new text beginor a manufacturer of vapor products license new text endshall be made for each place of business at which a distributor proposes to engage in businessnew text begin or a manufacturer proposes to manufacture vapor productsnew text end.

A separate application for a subjobber's license may be made by a licensed distributor for each place of business, other than that licensed in the distributor's license, to which the distributor sells or distributes stamped cigarettes or tobacco products.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective January 1, 2019.new text end

Sec. 18.

Subd. 5.

License fees; cigarettes.

Each application for a cigarette distributor's license must be accompanied by a fee of deleted text begin$300deleted text endnew text begin $500new text end. Each application for a cigarette subjobber's license must be accompanied by a fee of deleted text begin$24deleted text endnew text begin $100new text end. A distributor or subjobber applying for a license during the second year of a two-year licensing period is required to pay only one-half of the license fee.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for license periods beginning after December 31, 2018.new text end

Sec. 19.

Subd. 6.

License fees; tobacco products.

Each application for a tobacco products distributor's license must be accompanied by a fee of deleted text begin$75deleted text endnew text begin $500new text end. Each application for a tobacco products subjobber's license must be accompanied by a fee of deleted text begin$20deleted text endnew text begin $100new text end. A distributor or subjobber applying for a license during the second year of a two-year licensing period is required to pay only one-half of the license fee.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for license periods beginning after December 31, 2018.new text end

Sec. 20.

Minnesota Statutes 2016, section 297F.03, is amended by adding a subdivision to read:

new text beginSubd. 6a.new text end

new text beginLicense fees, vapor products.new text end

new text beginEach application for a manufacturer of vapor products license must be accompanied by a fee equal to the fee for a tobacco products distributor license under subdivision 6. A manufacturer of vapor products is not required to obtain a distributor license under subdivision 6 to sell vapor products manufactured by the licensee and sold in consumer packaging to a tobacco products distributor, a tobacco products subjobber, or a retailer.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective January 1, 2019.new text end

Sec. 21.

Subd. 7.

Issuance of license.

The commissioner, upon receipt of the application in proper form, and payment of the license fee required by this chapter, shall, unless otherwise provided by this chapter, issue the applicant a license in the form prescribed by the commissioner. The license permits the applicant to engage in business as anew text begin manufacturer of vapor products,new text enddistributornew text begin,new text end or subjobber at the place of business shown in the application.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective January 1, 2019.new text end

Sec. 22.

Subdivision 1.

Powers of commissioner.

The commissioner may revoke or suspend the license or licenses of anynew text begin manufacturer of vapor products,new text end distributornew text begin,new text end or subjobber for violation of this chapter, any other act applicable to the sale of cigarettes or tobacco products, or any rule promulgated by the commissioner, in furtherance of this chapter.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective January 1, 2019.new text end

Sec. 23.

Subdivision 1.

Powers of commissioner.

The commissioner may revoke deleted text beginordeleted text endnew text begin,new text end suspendnew text begin, or refuse to renewnew text end the license or licenses of any distributor or subjobbernew text begin, or refuse to issue a license to an applicant for a distributor or subjobber license,new text end for violation of this chapter, any other act applicable to the sale of cigarettes or tobacco products, or any rule promulgated by the commissioner, in furtherance of this chapter.

(2) after demand, has not filed tax returns required by the commissioner;

(3) had a deleted text begincigarette or tobaccodeleted text end licensenew text begin under this chapternew text end revoked by the commissioner within the past two years;

(4) had a sales and use tax permit revoked by the commissioner within the past two years; or

(5) has been convicted of a crime involving cigarettes, including but not limited to: selling stolen cigarettes or tobacco products, receiving stolen cigarettes or tobacco products, or involvement in the smuggling of cigarettes or tobacco products.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective January 1, 2019.new text end

Sec. 25.

Subd. 3.

Rates; tobacco products.

(a) Except as provided in paragraphs (b) and (c) and deleted text beginsubdivisiondeleted text endnew text begin subdivisionsnew text end 3anew text begin and 3bnew text end, a tax is imposed upon all tobacco products in this state and upon any person engaged in business as a distributor, at the rate of 95 percent of the wholesale sales price of the tobacco products. The tax is imposed at the time the distributor:

(1) brings, or causes to be brought, into this state from outside the state tobacco products for sale;

(2) makes, manufactures, or fabricates tobacco products in this state for sale in this state; or

(3) ships or transports tobacco products to retailers in this state, to be sold by those retailers.

(b) A tax equal to the greater of the tax imposed under paragraph (a) or a minimum tax equal to the rate imposed on a pack of 20 cigarettes weighing not more than three pounds per thousand, as established under subdivision 1, is imposed on each container of moist snuff weighing not more than 1.2 ounces. When more than one container subject to tax under this paragraph is packaged together, each container is subject to the minimum tax.

(c) Except as provided in paragraph (b), a tax equal to the greater of the tax imposed under paragraph (a) or a minimum tax equal to the rate imposed on a pack of 20 cigarettes weighing not more than three pounds per thousand, as established under subdivision 1, multiplied by the number of ounces of moist snuff in the container, divided by 1.2, is imposed on each container of moist snuff weighing more than 1.2 ounces.

(d) For purposes of this subdivision, a "container" means a consumer-size can, package, or other container that is marketed or packaged for sale to a retail purchaser.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective January 1, 2019.new text end

Sec. 26.

Minnesota Statutes 2016, section 297F.05, is amended by adding a subdivision to read:

new text beginSubd. 3b.new text end

new text beginRates; vapor products.new text end

new text begin(a) In lieu of the tax imposed under subdivision 3, a tax is imposed upon all vapor products in this state equal to:new text end

new text begin(1) in the case of a Minnesota distributor who brings, or causes to be brought, vapor products into this state, 95 percent of the sales price of vapor products paid by the distributor;new text end

new text begin(2) in the case of a distributor who sells vapor products from outside this state to a retailer, 95 percent of the sales price of vapor products paid by the retailer;new text end

new text begin(3) in the case of a manufacturer of vapor products who sells the manufactured product to retailers or subjobbers, 95 percent of the sales price of vapor products paid by the retailer or subjobber;new text end

new text begin(4) in the case of a Minnesota distributor who purchases vapor products from a manufacturer of vapor products, 95 percent of the sales price of vapor products paid by the distributor; andnew text end

new text begin(5) in the case of a manufacturer of vapor products who is also a retailer who sells the manufactured product to consumers, 95 percent of the sales price of vapor products.new text end

new text begin(b) The tax under this subdivision is imposed:new text end

new text begin(1) on the distributor at the time the vapor products in consumer packaging are brought into the state or received by the distributor who brings, or causes to be brought, into this state the vapor products for sale in this state;new text end

new text begin(2) on the distributor at the time the distributor ships or transports the vapor products in consumer packaging from outside this state to retailers in this state;new text end

new text begin(3) on the manufacturer of vapor products at the time the vapor products are sold to a retailer or subjobber;new text end

new text begin(4) on the distributor at the time a Minnesota distributor purchases the vapor products in consumer packaging that were manufactured by a Minnesota manufacturer of vapor products; andnew text end

new text begin(5) on the manufacturer of vapor products who is also a retailer of vapor products, at the time the vapor products manufactured in this state are sold to the consumer.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for vapor products bought, sold, or manufactured in Minnesota after December 31, 2018.new text end

Sec. 27.

Minnesota Statutes 2016, section 297F.06, is amended by adding a subdivision to read:

new text beginSubd. 6.new text end

new text beginExempt sales of vapor products to licensed manufacturers of vapor products.new text end

new text begin(a) A tobacco products distributor or manufacturer of vapor products, who at the time of sale accepts in good faith a valid exemption certificate from a purchaser that is a licensed manufacturer of vapor products, may sell vapor products in consumer packaging containing more than 50 milliliters of nicotine solution to the purchaser exempt from the tax imposed under section 297F.05, subdivision 3b.new text end

new text begin(b) An exemption certificate is valid if it:new text end

new text begin(1) is substantially in the form prescribed by the commissioner;new text end

new text begin(2) bears the name and address of the purchaser;new text end

new text begin(3) indicates the manufacturer of vapor products identification number issued to the purchaser by the commissioner;new text end

new text begin(4) is signed by the purchaser if it is in paper form, or meets the requirements of section 270C.304 if it is in electronic form; andnew text end

new text begin(5) indicates that the purchaser:new text end

new text begin(i) intends to use the product to manufacture vapor products;new text end

new text begin(ii) agrees to pay the applicable tax on the finished manufactured vapor products; andnew text end

new text begin(iii) agrees to pay the applicable tax if the purchaser does not use the product to manufacture vapor product, but sells the product to a consumer or retailer.new text end

new text begin(c) For determining the tax due under paragraph (b), clause (5), item (iii), any product subject to tax is treated as if it was manufactured by the purchaser.new text end

new text begin(d) A purchaser may use a blanket exemption certificate for continuing purchases. A purchaser using a blanket exemption certificate must update the certificate as needed to accurately reflect the information required under paragraph (b).new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective January 1, 2019.new text end

Sec. 28.

Subd. 8a.

Revolving account.

A deleted text begincigarettedeleted text end tax stamp revolving account is created. The commissioner shall use the amounts in this fund to purchase stamps for resale. The commissioner shall charge distributors for the tax value of the stamps they receive along with the commissioner's cost to purchase the stamps and ship them to the distributor. The stamp purchase and shipping costs recovered must be credited to the revolving account and are appropriated to the commissioner for the further purchases and shipping costs. The revolving account is initially funded by a $40,000 transfer from the Department of Revenue.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective January 1, 2020.new text end

Sec. 29.

new text begin[297F.081] TOBACCO PRODUCTS STAMPS.new text end

new text beginSubdivision 1.new text end

new text beginStamp affixed by distributor.new text end

new text begin(a) Before delivering, or causing to be delivered, a package of moist snuff to a distributor, subjobber, retailer, or consumer in this state, a distributor in this state must firmly affix to each package of moist snuff a tax stamp obtained from the commissioner.new text end

new text begin(b) When moist snuff is shipped into this state by any distributor from outside this state to a retailer or subjobber, the appropriate stamp must be affixed to the package at the time the package enters the state.new text end

new text beginSubd. 2.new text end

new text beginStamps; design; printing.new text end

new text beginThe commissioner shall adopt the design of the moist snuff stamp. At least one stamp must be designed for application to packages of moist snuff destined for retail sale on an Indian reservation that is a party to an agreement under section 270C.19, subdivision 2, and only to those packages. The commissioner shall arrange for the printing of stamps in such amounts and denominations as the commissioner deems necessary.new text end

new text beginSubd. 3.new text end

new text beginDeposit of proceeds.new text end

new text beginThe commissioner shall use the amounts appropriated by law to purchase stamps for resale. The commissioner shall charge the purchasers for the commissioner's cost to purchase the stamps along with the tax value of the stamps plus shipping costs. The tax value of the stamps must be deposited in the general fund. The portion of the charge to the purchaser that represents the commissioner's cost to purchase the stamps and the shipping costs must be deposited in the revolving stamp fund under section 297F.08, subdivision 8a.new text end

new text beginSubd. 4.new text end

new text beginSale of stamps.new text end

new text begin(a) The commissioner shall sell moist snuff stamps only to persons licensed as a tobacco products distributor.new text end

new text begin(b) The commissioner may prescribe the method of shipment of the stamps to the distributor.new text end

new text begin(c) The commissioner shall charge the purchaser for the commissioner's cost to purchase the stamps along with the tax value plus shipping costs.new text end

new text begin(d)(1) The commissioner may sell moist snuff stamps on a credit basis to a distributor unless:new text end

new text begin(i) the distributor has been licensed by the commissioner as a tobacco products distributor for less than one year;new text end

new text begin(ii) the distributor has failed, without reasonable cause, to timely file tax returns or reports required to be filed with the commissioner under a law administered by the commissioner at any time during the prior 24 months; ornew text end

new text begin(iii) the distributor has failed, without reasonable cause, to timely pay taxes and fees payable to the commissioner under a law administered by the commissioner at any time during the prior 24 months.new text end

new text begin(2) A distributor may purchase on a credit basis in any calendar month no more than the number of stamps needed to affix to 15 percent of the number of moist snuff packages reported to the commissioner as sold by the distributor during the previous 12-month period.new text end

new text begin(3) A distributor who purchases stamps on a credit basis must pay the cost of the stamps determined under paragraph (c) to the commissioner no later than the due date of the return required under section 297F.09, subdivision 2, for the month that the order for the stamps was received by the commissioner.new text end

new text beginSubd. 5.new text end

new text beginTax stamping machines.new text end

new text beginThe commissioner may require any person licensed as a distributor to stamp packages of moist snuff with a tax stamping machine, approved by the commissioner, which shall be provided by the distributor. The commissioner shall also supervise and check the operation of the machines. If the commissioner finds that a stamping machine is not affixing a legible stamp on the package, the commissioner may order the distributor to immediately cease the stamping process until the machine is functioning properly.new text end

new text beginSubd. 6.new text end

new text beginResale or transfer of stamps prohibited.new text end

new text begin(a) No distributor shall resell or transfer any moist snuff stamps purchased by the distributor from the commissioner. A distributor may transfer another state's stamped moist snuff to another distributor for the purpose of resale in the other state.new text end

new text begin(b) A distributor who has on hand any moist snuff stamps when its tobacco products distributor license is revoked, canceled, or not renewed may return the stamps to the commissioner and receive a refund of the amount paid for the stamps.new text end

new text begin(c) Moist snuff stamps that have become mutilated or unfit for use, or are affixed to moist snuff packages being returned to the manufacturer, or are affixed to packages of moist snuff that, or the contents of which, have become damaged and unfit for sale, shall be replaced by the commissioner, upon application by the distributor owning the stamps or moist snuff if the commissioner determines the stamps have not evidenced a taxable transaction.new text end

new text beginSubd. 7.new text end

new text beginRulemaking for stamps on other tobacco products.new text end

new text beginThe commissioner may promulgate rules that require tax stamps to be affixed to tobacco products other than moist snuff. The rules may apply to one or more classes or types of tobacco product.new text end

new text beginEFFECTIVE DATE.new text end

new text beginSubdivision 1 is effective for moist snuff delivered, caused to be delivered, or shipped after June 30, 2020. Subdivisions 2 to 7 are effective January 1, 2020.new text end

Sec. 30.

Subd. 2.

Monthly return; tobacco products distributor.

On or before the 18th day of each calendar month, a distributor with a place of business in this statenew text begin or a manufacturer of vapor productsnew text end shall file a return with the commissioner showing the quantity and wholesale sales pricenew text begin or sales price of vapor productnew text end of each tobacco product:

(1) brought, or caused to be brought, into this state for sale; and

(2) made, manufactured, or fabricated in this state for sale in this state, during the preceding calendar month.

Every licensed distributor outside this state shall in like manner file a return showing the quantity and wholesale sales pricenew text begin or sales of vapor productnew text end of each tobacco product shipped or transported to retailers in this state to be sold by those retailers, during the preceding calendar month. Returns must be made in the form and manner prescribed by the commissioner and must contain any other information required by the commissioner. The return must be accompanied by a remittance for the full tax liability shown. For distributors subject to the accelerated tax payment requirements in subdivision 10, the return for the May liability is due two business days before June 30th of the year and the return for the June liability is due on or before August 18th of the year.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxes imposed on vapor products brought into the state or manufactured in the state after December 31, 2018.new text end

Sec. 31.

Subd. 7.

Electronic payment.

A cigarette or tobacco products distributornew text begin or a manufacturer of vapor productsnew text end having a liability of $10,000 or more during a fiscal year ending June 30 must remit all liabilities in all subsequent calendar years by electronic means.

Subd. 10.

A cigarette or tobacco products distributornew text begin or a manufacturer of vapor productsnew text end having a liability of $250,000 or more during a fiscal year ending June 30, shall remit the June liability for the next year in the following manner:

(a) Two business days before June 30 of the year, the distributornew text begin or manufacturernew text end shall remit the actual May liability and 81.4 percent of the estimated June liability to the commissioner and file the return in the form and manner prescribed by the commissioner.

(b) On or before August 18 of the year, the distributornew text begin or manufacturernew text end shall submit a return showing the actual June liability and pay any additional amount of tax not remitted in June. A penalty is imposed equal to ten percent of the amount of June liability required to be paid in June, less the amount remitted in June. However, the penalty is not imposed if the amount remitted in June equals the lesser of:

(1) 81.4 percent of the actual June liability; or

(2) 81.4 percent of the preceding May liability.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective January 1, 2019.new text end

Sec. 33.

Subd. 3.

Manufacturers.

new text begin(a) new text endA manufacturer of tobacco products as defined by this chapter shall report in the form and manner prescribed by the commissioner all sales of tobacco products to Minnesota licensed distributors, subjobbers, retailers, or to any locations within the state. The report is due on the 18th day of the month following the reporting period.

new text begin(b) A manufacturer of vapor products must file a report with the commissioner no later than the 18th day of each month identifying all vapor products placed into consumer packaging and all sales of vapor products made by the manufacturer during the preceding month. The report must identify the names and addresses of the persons within the state to whom shipments to tobacco products distributors, subjobbers, or retailers were made, and the quantity of vapor products manufactured or sold by type of product, brand, and size. The reports must also include information related to sales and purchases of tax exempt vapor products. If the manufacturer is also a retailer, the report must include the quantity of vapor products sold to customers by type of product, brand, and size.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective January 1, 2019.new text end

Sec. 34.

Subd. 2.

Tobacco products distributor.

(a) A distributor shall keep at each licensed place of business complete and accurate records for that place of business, including itemized invoices of tobacco products held, purchased, manufactured, brought in or caused to be brought in from outside the state, or shipped or transported to retailers in this state, and all sales of tobacco products made, except sales to the ultimate consumer.new text begin These records must show the names and addresses of purchasers, the inventory of all moist snuff stamps affixed and unaffixed to packages of moist snuff, and all moist snuff on hand at the close of each period for which a return is required, and any other pertinent papers and documents relating to the purchase, sale, or disposition of moist snuff.new text end

(b) When a licensed distributor sells tobacco products exclusively to the ultimate consumer at the address given in the license, no invoice of those sales is required, but itemized invoices must be made of all tobacco products transferred to other retail outlets owned or controlled by that licensed distributor.

(c) All books, records, and other documents required by this chapter must be preserved for a period of at least 3-1/2 years after the date of the documents or the date of the entries appearing in the records, unless the commissioner authorizes in writing their destruction or disposal at an earlier date.

(d) To determine whether the distributor is in compliance with the provisions of this chapter, at any time during usual business hours the commissioner, or duly authorized agents or employees, may enter a place of business of a distributor, without a search warrant, and inspect the premises, the records required to be kept under this chapter, and the tobacco products in that place of business. If the commissioner, or an agent or employee of the commissioner, is denied free access or is hindered or interfered with in making the examination, the commissioner may revoke the distributor's license.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for moist snuff purchased, sold, or disposed of after June 30, 2020.new text end

Sec. 35.

Minnesota Statutes 2016, section 297F.13, is amended by adding a subdivision to read:

new text beginSubd. 2a.new text end

new text beginManufacturers of vapor products.new text end

new text begin(a) A manufacturer of vapor products shall keep at each licensed place of business complete and accurate records for that place of business, including itemized invoices of vapor products held, purchased, manufactured, brought in or caused to be brought in from outside the state, or shipped or transported to distributors, subjobbers, or retailers in this state.new text end

new text begin(b) A manufacturer of vapor products who is also a retailer must keep records of all sales made to the ultimate customer. These records must include cash register tapes or other similar electronic records and any other records which involve purchases or sales of vapor products which are required to be kept by a retailer who makes sales subject to tax under chapter 297A.new text end

new text begin(c) When a manufacturer of vapor products sells vapor products exclusively to the ultimate consumer at the address given in the license, no invoice of those sales is required, but itemized invoices must be made of all vapor products transferred to other retail outlets owned or controlled by that manufacturer.new text end

new text begin(d) All books, records, and other documents required by this subdivision must be preserved for a period of at least 3-1/2 years after the date of the documents or the date of the entries appearing in the records, unless the commissioner authorizes in writing the destruction or disposal at an earlier date.new text end

new text begin(e) To determine whether the manufacturer is in compliance with the provisions of this chapter, at any time during usual business hours the commissioner, or duly authorized agents or employees, may enter a place of business of a manufacturer, without a search warrant, and inspect the premises, the records required to be kept under this chapter, and the vapor products in that place of business. If the commissioner, or an agent or employee of the commissioner, is denied free access or is hindered or interfered with in making the examination, the commissioner may revoke the manufacturer's license.new text end

new text beginEFFECTIVE DATE.new text end

Sec. 36.

Subd. 4.

Retailer and subjobber to preserve purchase invoices.

Every retailer and subjobber shall procure itemized invoices of all cigarettes or tobacco products purchased.

The retailer and subjobber shall preserve a legible copy of each invoice for one year from the date of the invoicenew text begin or as long as the cigarette or tobacco product listed on the invoice is available for sale or in their possession, whichever period is longernew text end. The retailer and subjobber shall preserve copies of the invoices at each retail location or at a central location provided that the invoice must be produced and made available at a retail location within one hour when requested by the commissioner or duly authorized agents and employees. Copies should be numbered and kept in chronological order.

To determine whether the business is in compliance with the provisions of this chapter, at any time during usual business hours, the commissioner, or duly authorized agents and employees, may enter any place of business of a retailer or subjobber without a search warrant and inspect the premises, the records required to be kept under this chapter, and the packages of cigarettes, tobacco products, and vending devices contained on the premises.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for sales and purchases by subjobbers and retailers made on or after August 1, 2018.new text end

Sec. 37.

Subd. 9.

Physical inventory.

The commissioner or the commissioner's authorized agents may, as considered necessary, require a cigarette or tobacco products distributornew text begin or a manufacturer of vapor productsnew text end to furnish a physical inventory of all cigarettes or tobacco products in stock. The inventory must contain the information that the commissioner requests and must be certified by an officer of the corporation.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective January 1, 2019.new text end

Sec. 38.

new text begin[297F.186] REVOCATION OF CIGARETTE AND TOBACCO RETAIL LICENSE.new text end

new text beginSubdivision 1.new text end

new text beginCigarette and tobacco retail revocation.new text end

new text begin(a) A licensing authority must not issue, transfer, or renew, and must revoke, a license if the commissioner notifies the licensing authority that the license holder has been in possession of contraband cigarettes or tobacco products under section 297F.21 at the location covered by the license.new text end

new text begin(b) Within ten days after receipt of the notification from the commissioner under paragraph (a), the licensing authority must notify the license holder by mail of the revocation of the license. The notice must include a copy of the commissioner's notice to the licensing authority and information, in the form specified by the commissioner, on the licensee's option for receiving a license clearance from the commissioner. The licensing authority must revoke the license within 30 days after receiving the notice from the commissioner, unless it receives a license clearance from the commissioner as provided in subdivision 2, paragraph (b).new text end

new text begin(c) For purposes of this section, the following terms have the meanings given.new text end

new text begin(1) "License holder" means an individual or legal entity who has a license to sell cigarettes or tobacco products issued under chapter 461.new text end

new text begin(2) "License" means a license to sell cigarettes or tobacco products under chapter 461.new text end

new text begin(3) "Licensing authority" means a town board, county board, governing body of a home rule charter or statutory city, or state agricultural society authorized to issue licenses under chapter 461.new text end

new text begin(4) "Applicant" is any individual, corporation, partnership, or any other legal entity that is a holder of a license or that has filed an application to obtain a license.new text end

new text begin(5) "Responsible person" means any individual who, either singly or jointly with others, has the control of, supervision of, or responsibility for filing tax returns or reports, paying taxes, or collecting or withholding and remitting taxes to the commissioner for a license holder, or who has authority to purchase cigarettes or tobacco products, or supervises a person who has authority to purchase cigarettes or tobacco products for the license holder.new text end

new text beginSubd. 2.new text end

new text beginNew licenses after revocation.new text end

new text begin(a) An applicant who has had a license revoked under this section, or an applicant with a responsible person who was a responsible person for another entity for which a license was revoked under this section, may not apply for a license or seek the reinstatement of a revoked license unless the applicant presents to the licensing authority a license clearance issued by the commissioner. A licensing authority must not issue a new license to an applicant with such a responsible person or to an applicant who has had a license revoked under this section or reinstate a revoked license unless the applicant presents to the authority a license clearance issued by the commissioner.new text end

new text begin(b) Except as provided in paragraph (f), the commissioner may issue a license clearance if the applicant and all responsible persons of the applicant:new text end

new text begin(1) sign an agreement that acknowledges that the applicant and the responsible person will follow all laws related to the taxation of cigarettes and tobacco products, including the requirements to:new text end

new text begin(i) purchase all cigarettes and tobacco products from distributors and subjobbers licensed by the commissioner;new text end

new text begin(ii) maintain invoices of all cigarettes or tobacco products purchased as required under section 297F.13, subdivision 4, and produce those invoices within one hour when requested by the commissioner or duly authorized agents and employees; andnew text end

new text begin(iii) timely file and pay to the commissioner all returns and all sales taxes related to the sale of tobacco products; andnew text end

new text begin(2) deposit with the commissioner security or a surety bond in an amount equal to ten times the amount of tax on the contraband cigarettes or tobacco products. The commissioner must hold the security deposit for two years.new text end

new text begin(c) The commissioner must pay interest on any money deposited as security. The interest is calculated from the date of deposit to the date of refund, or date of application to any outstanding tax liability, at a rate specified in section 270C.405. The commissioner must refund the security deposit to the applicant at the end of the two-year period unless the applicant has any unpaid tax liabilities payable to the commissioner. The commissioner may apply the security deposit to any unpaid tax liabilities of the applicant owed to the commissioner as well as the tax on any contraband cigarettes or tobacco products owned, possessed, sold, or offered for sale by the applicant after the license clearance has been issued.new text end

new text begin(d) The commissioner may refund the security deposit before the end of the two-year holding period if the license holder no longer has a license to sell cigarettes or tobacco products issued by any licensing authority in the state.new text end

new text begin(e) If the commissioner determines that a licensing authority has issued a new license or reinstated a revoked license without the applicant submitting a license clearance, the commissioner may notify the licensing authority to revoke the license. Revocations under this subdivision are controlled by the provisions of subdivision 1, paragraph (b), and subdivision 3. Notice of intent to require revocation from the commissioner must be sent to the license holder and to the responsible person of the license holder.new text end

new text begin(f) If an applicant has had, or if a person has been a responsible person to, a cumulative number of two licenses revoked under this subdivision in a five-year period by all licensing authorities within the state, the commissioner may refuse to issue a license clearance until 24 months have elapsed after the last revocation and the applicant has satisfied the conditions for reinstatement of a revoked license or issuance of a new license imposed by this subdivision.new text end

new text beginSubd. 3.new text end

new text beginNotice and hearing.new text end

new text begin(a) Prior to notifying a licensing authority pursuant to subdivision 1 to revoke a license, the commissioner must send a notice to the license holder and to any known responsible person of the license holder of the commissioner's intent to require revocation of the license and of the license holder's or responsible person's right to a hearing. If the license holder or responsible person requests a hearing in writing within 30 days of the date of the notice, a contested case hearing must be held. The hearing must be held within 45 days of the date the commissioner refers the case to the Office of Administrative Hearings. Notwithstanding any law to the contrary, the license holder or responsible person must be served within 20 days' notice in writing specifying the time and place of the hearing and the allegations against the license holder or responsible person. The notice may be served personally or by mail. A license is subject to revocation when 30 days have passed following the date of the notice in this paragraph without the license holder requesting a hearing, or, if a hearing is timely requested, upon final determination of the hearing under section 14.62, subdivision 1.new text end

new text begin(b) The commissioner may notify a licensing authority under subdivision 1 only after the requirements of paragraph (a) have been satisfied.new text end

new text begin(c) A hearing under this subdivision is in lieu of any other hearing or proceeding provided by law arising from any action taken under subdivision 1.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective August 1, 2018.new text end

Sec. 39.

Minnesota Statutes 2016, section 297F.19, is amended by adding a subdivision to read:

new text beginSubd. 10.new text end

new text beginPenalty for retailers who fail to comply.new text end

new text begin(a) A retailer who fails to produce an itemized invoice from a licensed seller within one hour of being requested by the commissioner to do so as required under section 297F.13, subdivision 4, or who offers for sale or holds in inventory cigarettes or tobacco products without a license required under chapter 461 is subject to a penalty of $100 for the first violation, $2,000 for the second violation, and $5,000 for the third and each subsequent violation occurring during any 36-month period.new text end

new text begin(b) A retailer who offers for sale or holds in inventory untaxed cigarettes or tobacco products is subject to a penalty equal to the greater of $2,000, or 150 percent of the tax due on the cigarettes or tobacco products.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for violations occurring on or after August 1, 2018.new text end

Sec. 40.

Minnesota Statutes 2016, section 297F.20, is amended by adding a subdivision to read:

new text beginSubd. 2a.new text end

new text beginPenalties for willful failure to file or pay.new text end

new text begin(a) A person or consumer required to file a return, report, or other document with the commissioner who willfully attempts in any manner to evade or defeat a tax by failing to do so when required is guilty of a felony.new text end

new text begin(b) A person or consumer required to pay or to collect and remit a tax under this chapter, who willfully attempts to evade or defeat a tax by failing to do so when required, is guilty of a felony.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for offenses committed on or after August 1, 2018.new text end

Sec. 41.

Subd. 5.

(a) Except as provided in paragraph (b), whenever a package of cigarettes new text beginor moist snuff new text endis found in the place of business or in the possession of any person without a proper stamp affixed as required by this chapter, it is presumed that those cigarettes new text beginor moist snuff new text endare kept there or held by that person illegally.

(b) This presumption does not apply to:

(1) cigarettes new text beginor moist snuff new text endin the place of business or in the possession of a licensed distributor;

(2) cigarettes new text beginor moist snuff new text endin the possession of a common carrier or sleeping car company engaged in interstate commerce;

(3) cigarettes new text beginor moist snuff new text endheld in a public warehouse of first destination in this state, in the unbroken, original shipping containers, subject to delivery or shipping instructions from the manufacturer or a distributor;

(4) cigarettes new text beginor moist snuff new text endin the possession of a person other than a distributor in quantities of 200 cigarettes or lessnew text begin or $50 or less of moist snuffnew text end, when those cigarettes new text beginor moist snuff new text endhave had the individual packages or seals broken, and when they are intended for personal use and not to be sold or offered for sale;

(5) cigarettes new text beginor moist snuff new text endsold under circumstances in which the tax cannot legally be imposed because of the laws or Constitution of the United States.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for moist snuff possessed after December 31, 2020.new text end

Sec. 42.

Subd. 6.

Unstamped cigarettes; untaxed tobacco products.

(a) A person, other than a licensed distributornew text begin, a licensed manufacturer of vapor products,new text end or a consumer, who possesses, receives, or transports fewer than 5,000 unstamped cigarettes, or up to $350 worth of untaxed tobacco products is guilty of a misdemeanor.

(b) A person, other than a licensed distributornew text begin, a licensed manufacturer of vapor products,new text endor a consumer, who possesses, receives, or transports 5,000 or more, but fewer than 20,001 unstamped cigarettes, or more than $350 but less than $1,400 worth of untaxed tobacco products is guilty of a gross misdemeanor.

(c) A person, other than a licensed distributornew text begin, a licensed manufacturer of vapor products,new text endor a consumer, who possesses, receives, or transports more than 20,000 unstamped cigarettes, or $1,400 or more worth of untaxed tobacco products is guilty of a felony.

(d) For purposes of this subdivision, an individual in possession of more than 4,999 unstamped cigarettes, or more than $350 worth of untaxed tobacco products, is presumed not to be a consumer.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective January 1, 2019.new text end

Sec. 43.

Subd. 6.

Unstamped cigarettes; untaxed tobacco products.

(a) A person, other than a licensed distributor or a consumer, who possesses, receives, or transports fewer than 5,000 unstamped cigarettes, or up to $350 worth of untaxed tobacco products new text beginor unstamped moist snuff new text endis guilty of a misdemeanor.

(b) A person, other than a licensed distributor or a consumer, who possesses, receives, or transports 5,000 or more, but fewer than 20,001 unstamped cigarettes, or more than $350 but less than $1,400 worth of untaxed tobacco products new text beginor unstamped moist snuff new text endis guilty of a gross misdemeanor.

(c) A person, other than a licensed distributor or a consumer, who possesses, receives, or transports more than 20,000 unstamped cigarettes, or $1,400 or more worth of untaxed tobacco products new text beginor unstamped moist snuff new text endis guilty of a felony.

(d) For purposes of this subdivision, an individual in possession of more than 4,999 unstamped cigarettes, or more than $350 worth of untaxed tobacco productsnew text begin or unstamped moist snuffnew text end, is presumed not to be a consumer.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for moist snuff possessed after December 31, 2020, or for moist snuff received or transported after June 30, 2020.new text end

Sec. 44.

Subd. 7.

Sale of deleted text begincigarettedeleted text end packages with Indian stamp.

(a) A retailer doing business off of an Indian reservation who sells or offers to sell more than 200 but fewer than 5,000 cigarettes new text beginor up to $350 worth of tobacco products new text endwith Indian stamps is guilty of a misdemeanor.

(b) A retailer doing business off of an Indian reservation who sells or offers to sell 5,000 or more, but fewer than 20,001 cigarettes new text beginor more than $350 but less than $1,400 worth of tobacco products new text endwith Indian stamps is guilty of a gross misdemeanor.

(c) A retailer doing business off of an Indian reservation who sells or offers to sell more than 20,000 cigarettes new text beginor $1,400 or more worth of tobacco products new text endwith Indian stamps is guilty of a felony.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for sales of tobacco products, or offers to sell tobacco products, after June 30, 2020.new text end

Sec. 45.

Subd. 9.

Purchases from unlicensed sellers.

(a) No retailer or subjobber shall purchase cigarettes or tobacco products from any person who is not licensed under section 297F.03as a licensed distributornew text begin, manufacturer of vapor products,new text end or subjobber.

(b) A retailer or subjobber who purchases from an unlicensed seller fewer than 5,000 cigarettes or up to $350 worth of tobacco products is guilty of a misdemeanor.

(c) A retailer or subjobber who purchases from an unlicensed seller 5,000 or more, but fewer than 20,001 cigarettes or more than $350 but less than $1,400 worth of tobacco products is guilty of a gross misdemeanor.

(d) A retailer or subjobber who purchases from an unlicensed seller more than 20,000 cigarettes or $1,400 or more worth of tobacco products is guilty of a felony.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective January 1, 2019.new text end

Sec. 46.

Minnesota Statutes 2016, section 297F.20, is amended by adding a subdivision to read:

new text beginSubd. 13.new text end

new text beginAggregation and consolidation of venue.new text end

new text beginIn any prosecution under this section, the number of unstamped cigarettes or the value of the untaxed tobacco products possessed, received, transported, sold, offered to be sold, or purchased in violation of this section within any six-month period may be aggregated and the defendant charged accordingly in applying the provisions of this section. When two or more offenses are committed by the same individual in two or more counties, the accused may be prosecuted in any county in which one of the offenses was committed.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for offenses committed on or after August 1, 2018.new text end

Sec. 47.

Subdivision 1.

Contraband defined.

The following are declared to be contraband and therefore subject to civil and criminal penalties under this chapter:

(a) Cigarette packages which do not have stamps affixed to them as provided in this chapter, including but not limited to (i) packages with illegible stamps and packages with stamps that are not complete or whole even if the stamps are legible, and (ii) all devices for the vending of cigarettes in which packages as defined in item (i) are found, including all contents contained within the devices.

(b) A device for the vending of cigarettes and all packages of cigarettes, where the device does not afford at least partial visibility of contents. Where any package exposed to view does not carry the stamp required by this chapter, it shall be presumed that all packages contained in the device are unstamped and contraband.

(c) A device for the vending of cigarettes to which the commissioner or authorized agents have been denied access for the inspection of contents. In lieu of seizure, the commissioner or an agent may seal the device to prevent its use until inspection of contents is permitted.

(d) A device for the vending of cigarettes which does not carry the name and address of the owner, plainly marked and visible from the front of the machine.

(e) A device including, but not limited to, motor vehicles, trailers, snowmobiles, airplanes, and boats used with the knowledge of the owner or of a person operating with the consent of the owner for the storage or transportation of more than 5,000 cigarettes which are contraband under this subdivision. When cigarettes are being transported in the course of interstate commerce, or are in movement from either a public warehouse to a distributor upon orders from a manufacturer or distributor, or from one distributor to another, the cigarettes are not contraband, notwithstanding the provisions of clause (a).

(f) A device including, but not limited to, motor vehicles, trailers, snowmobiles, airplanes, and boats used with the knowledge of the owner, or of a person operating with the consent of the owner, for the storage or transportation of untaxed tobacco products intended for sale in Minnesota other than those in the possession of a licensed distributor on or before the due date for payment of the tax under section 297F.09, subdivision 2.

(i) Tobacco products on which the tax has not been paid by a licensed distributornew text begin or manufacturer of vapor productsnew text end.

(j) Any cigarette packages or tobacco products offered for sale or held as inventory for which there is not an invoice from a licensed seller as required under section 297F.13, subdivision 4.

(k) Cigarette packages which have been imported into the United States in violation of United States Code, title 26, section 5754. All cigarettes held in violation of that section shall be presumed to have entered the United States after December 31, 1999, in the absence of proof to the contrary.

(l) Cigarettes subject to forfeiture under section 299F.854, subdivision 5, and cigarette packaging and markings, including the cigarettes contained therein, which do not meet the requirements under section 299F.853, paragraph (a).

new text begin(m) Vapor products purchased exempt from tax under section 297F.06, subdivision 6, by a person other than a licensed manufacturer of vapor products.new text end

new text beginEFFECTIVE DATE.new text end

Sec. 48.

Subdivision 1.

Contraband defined.

The following are declared to be contraband and therefore subject to civil and criminal penalties under this chapter:

(a) Cigarette packages which do not have stamps affixed to them as provided in this chapter, including but not limited to (i) packages with illegible stamps and packages with stamps that are not complete or whole even if the stamps are legible, and (ii) all devices for the vending of cigarettes in which packages as defined in item (i) are found, including all contents contained within the devices.

(b) A device for the vending of cigarettes and all packages of cigarettes, where the device does not afford at least partial visibility of contents. Where any package exposed to view does not carry the stamp required by this chapter, it shall be presumed that all packages contained in the device are unstamped and contraband.

(c) A device for the vending of cigarettes to which the commissioner or authorized agents have been denied access for the inspection of contents. In lieu of seizure, the commissioner or an agent may seal the device to prevent its use until inspection of contents is permitted.

(d) A device for the vending of cigarettes which does not carry the name and address of the owner, plainly marked and visible from the front of the machine.

(e) A device including, but not limited to, motor vehicles, trailers, snowmobiles, airplanes, and boats used with the knowledge of the owner or of a person operating with the consent of the owner for the storage or transportation of more than 5,000 cigarettes which are contraband under this subdivision. When cigarettes are being transported in the course of interstate commerce, or are in movement from either a public warehouse to a distributor upon orders from a manufacturer or distributor, or from one distributor to another, the cigarettes are not contraband, notwithstanding the provisions of clause (a).

(f) A device including, but not limited to, motor vehicles, trailers, snowmobiles, airplanes, and boats used with the knowledge of the owner, or of a person operating with the consent of the owner, for the storage or transportation of untaxed tobacco products intended for sale in Minnesota other than those in the possession of a licensed distributor on or before the due date for payment of the tax under section 297F.09, subdivision 2.

(i) Tobacco products on which the tax has not been paid by a licensed distributor.

(j) Any cigarette packages or tobacco products offered for sale or held as inventory for which deleted text beginthere is not an invoice from a licensed sellerdeleted text endnew text begin the retailer or subjobber does not produce an itemized invoice from a licensed seller within one hour after being requested by the commissioner to do sonew text end as required under section 297F.13, subdivision 4.

(k) Cigarette packages which have been imported into the United States in violation of United States Code, title 26, section 5754. All cigarettes held in violation of that section shall be presumed to have entered the United States after December 31, 1999, in the absence of proof to the contrary.

(l) Cigarettes subject to forfeiture under section 299F.854, subdivision 5, and cigarette packaging and markings, including the cigarettes contained therein, which do not meet the requirements under section 299F.853, paragraph (a).

new text begin(m) All cigarettes and tobacco products, including those for which the tax has been paid, offered for sale or held as inventory by a retailer operating without a license required under chapter 461.new text end

new text beginEFFECTIVE DATE.new text end

Sec. 49.

Subdivision 1.

Contraband defined.

The following are declared to be contraband and therefore subject to civil and criminal penalties under this chapter:

(a) Cigarette new text beginor tobacco products new text endpackages which do not have stamps affixed to them as provided in this chapter, including but not limited to (i) packages with illegible stamps and packages with stamps that are not complete or whole even if the stamps are legible, and (ii) all devices for the vending of cigarettes in which packages as defined in item (i) are found, including all contents contained within the devices.

(b) A device for the vending of cigarettes and all packages of cigarettes, where the device does not afford at least partial visibility of contents. Where any package exposed to view does not carry the stamp required by this chapter, it shall be presumed that all packages contained in the device are unstamped and contraband.

(c) A device for the vending of cigarettes to which the commissioner or authorized agents have been denied access for the inspection of contents. In lieu of seizure, the commissioner or an agent may seal the device to prevent its use until inspection of contents is permitted.

(d) A device for the vending of cigarettes which does not carry the name and address of the owner, plainly marked and visible from the front of the machine.

(e) A device including, but not limited to, motor vehicles, trailers, snowmobiles, airplanes, and boats used with the knowledge of the owner or of a person operating with the consent of the owner for the storage or transportation of more than 5,000 cigarettes which are contraband under this subdivision. When cigarettes are being transported in the course of interstate commerce, or are in movement from either a public warehouse to a distributor upon orders from a manufacturer or distributor, or from one distributor to another, the cigarettes are not contraband, notwithstanding the provisions of deleted text beginclausedeleted text endnew text begin paragraphnew text end (a).

(f) A device including, but not limited to, motor vehicles, trailers, snowmobiles, airplanes, and boats used with the knowledge of the owner, or of a person operating with the consent of the owner, for the storage or transportation of untaxed tobacco products intended for sale in Minnesota other than those in the possession of a licensed distributor on or before the due date for payment of the tax under section 297F.09, subdivision 2.

(h) Cigarette new text beginor tobacco products new text endpackages offered for sale or held as inventory in violation of section 297F.20, subdivision 7.

(i) Tobacco products on which the tax has not been paid by a licensed distributor.

(j) Any cigarette packages or tobacco products offered for sale or held as inventory for which there is not an invoice from a licensed seller as required under section 297F.13, subdivision 4.

(k) Cigarette packages which have been imported into the United States in violation of United States Code, title 26, section 5754. All cigarettes held in violation of that section shall be presumed to have entered the United States after December 31, 1999, in the absence of proof to the contrary.

(l) Cigarettes subject to forfeiture under section 299F.854, subdivision 5, and cigarette packaging and markings, including the cigarettes contained therein, which do not meet the requirements under section 299F.853, paragraph (a).

new text beginEFFECTIVE DATE.new text end

new text beginThe amendment to paragraph (a) is effective January 1, 2021. The amendment to paragraph (h) is effective for packages of tobacco products offered for sale or held as inventory after June 30, 2020.new text end

Sec. 50.

Subd. 8.

Notice to commissioner.

The licensing authority under this section shall, within 30 days of the issuance new text beginor renewal new text endof a license, deleted text begininformdeleted text endnew text begin providenew text end the commissioner of revenue deleted text beginofdeleted text endnew text begin, on a form prescribed by the commissioner and completed by the applicant,new text end the licensee's name, address, trade name, new text beginMinnesota business identification number, the name of the individual or individuals who will be responsible for purchasing cigarettes or tobacco products for the licensee, new text endand the effective and expiration dates of the license. The commissioner of revenue must also be informed of a license deleted text beginrenewal,deleted text end transfer, cancellation, suspension, or revocation during the license period.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for licenses issued, renewed, transferred, canceled, suspended, or revoked after December 31, 2018.new text end

Sec. 51. new text beginAPPROPRIATIONS.new text end

new text begin$417,000 in fiscal year 2019 is appropriated from the general fund to the commissioner of revenue to carry out the provisions of this article. $462,000 in fiscal year 2020 and $425,000 in fiscal year 2021 shall be added to the base appropriations to the Department of Revenue.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective the day following final enactment.new text end

new text beginEFFECTIVE DATE.new text end

ARTICLE 6

PROPERTY TAX UPDATES

Section 1.

Subd. 13.

Homestead application.

(a) A person who meets the homestead requirements under subdivision 1 must file a homestead application with the county assessor to initially obtain homestead classification.

(b) The commissioner shall prescribe the content, format, and manner of the homestead application required to be filed under this chapter pursuant to section 270C.30. The application must clearly inform the taxpayer that this application must be signed by all owners who occupy the property or by the qualifying relative and returned to the county assessor in order for the property to receive homestead treatment.

(c) Every property owner applying for homestead classification must furnish to the county assessor the Social Security number new text beginor individual tax identification number new text endof each occupant who is listed as an owner of the property on the deed of record, the name and address of each owner who does not occupy the property, and the name and Social Security number new text beginor individual tax identification number new text endof each owner's spouse. The application must be signed by each owner who occupies the property and by each owner's spouse who occupies the property, or, in the case of property that qualifies as a homestead under subdivision 1, paragraph (c), by the qualifying relative.

If a property owner occupies a homestead, the property owner's spouse may not claim another property as a homestead unless the property owner and the property owner's spouse file with the assessor an affidavit or other proof required by the assessor stating that the property qualifies as a homestead under subdivision 1, paragraph (e).

Owners or spouses occupying residences owned by their spouses and previously occupied with the other spouse, either of whom fail to include the other spouse's name and Social Security number new text beginor individual tax identification number new text endon the homestead application or provide the affidavits or other proof requested, will be deemed to have elected to receive only partial homestead treatment of their residence. The remainder of the residence will be classified as nonhomestead residential. When an owner or spouse's name and Social Security number new text beginor individual tax identification number new text endappear on homestead applications for two separate residences and only one application is signed, the owner or spouse will be deemed to have elected to homestead the residence for which the application was signed.

(d) If residential real estate is occupied and used for purposes of a homestead by a relative of the owner and qualifies for a homestead under subdivision 1, paragraph (c), in order for the property to receive homestead status, a homestead application must be filed with the assessor. The Social Security number new text beginor individual tax identification number new text endof each relative occupying the property and the name and Social Security number new text beginor individual tax identification number new text endof the spouse of a relative occupying the property shall be required on the homestead application filed under this subdivision. If a different relative of the owner subsequently occupies the property, the owner of the property must notify the assessor within 30 days of the change in occupancy. The Social Security number new text beginor individual tax identification number new text endof a relative occupying the property or the spouse of a relative occupying the property is private data on individuals as defined by section 13.02, subdivision 12, but may be disclosed to the commissioner of revenue, or, for the purposes of proceeding under the Revenue Recapture Act to recover personal property taxes owing, to the county treasurer.

(e) The homestead application shall also notify the property owners that if the property is granted homestead status for any assessment year, that same property shall remain classified as homestead until the property is sold or transferred to another person, or the owners, the spouse of the owner, or the relatives no longer use the property as their homestead. Upon the sale or transfer of the homestead property, a certificate of value must be timely filed with the county auditor as provided under section 272.115. Failure to notify the assessor within 30 days that the property has been sold, transferred, or that the owner, the spouse of the owner, or the relative is no longer occupying the property as a homestead, shall result in the penalty provided under this subdivision and the property will lose its current homestead status.

(f) If a homestead application has not been filed with the county by December 15, the assessor shall classify the property as nonhomestead for the current assessment year for taxes payable in the following year, provided that the owner may be entitled to receive the homestead classification by proper application under section 375.192.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for applications for homestead filed in 2018 and thereafter.new text end

Sec. 2.

Subd. 13c.

Property lists.

In addition to lists of homestead properties, the commissioner may ask the counties to furnish lists of all properties and the record owners. The Social Security numbersnew text begin, individual tax identification numbers,new text end and federal identification numbers that are maintained by a county or city assessor for property tax administration purposes, and that may appear on the lists retain their classification as private or nonpublic data; but may be viewed, accessed, and used by the county auditor or treasurer of the same county for the limited purpose of assisting the commissioner in the preparation of microdata samples under section 270C.12. The commissioner shall use the information provided on the lists as appropriate under the law, including for the detection of improper claims by owners, or relatives of owners, under chapter 290A.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for homestead data provided to the commissioner of revenue in 2019 and thereafter.new text end

Sec. 3.

Subd. 13d.

Homestead data.

On or before April 30 each year beginning in 2007, each county must provide the commissioner with the following data for each parcel of homestead property by electronic means as defined in section 289A.02, subdivision 8:

(1) the property identification number assigned to the parcel for purposes of taxes payable in the current year;

(2) the name and Social Security number new text beginor individual tax identification number new text endof each occupant of homestead property who is the property owner or qualifying relative of a property owner, and the spouse of the property owner who occupies homestead property or spouse of a qualifying relative of a property owner who occupies homestead property;

(3) the classification of the property under section 273.13 for taxes payable in the current year and in the prior year;

(4) an indication of whether the property was classified as a homestead for taxes payable in the current year because of occupancy by a relative of the owner or by a spouse of a relative;

(5) the property taxes payable as defined in section 290A.03, subdivision 13, for the current year and the prior year;

(6) the market value of improvements to the property first assessed for tax purposes for taxes payable in the current year;

(7) the assessor's estimated market value assigned to the property for taxes payable in the current year and the prior year;

(8) the taxable market value assigned to the property for taxes payable in the current year and the prior year;

(9) whether there are delinquent property taxes owing on the homestead;

(10) the unique taxing district in which the property is located; and

(11) such other information as the commissioner decides is necessary.

The commissioner shall use the information provided on the lists as appropriate under the law, including for the detection of improper claims by owners, or relatives of owners, under chapter 290A.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for homestead data provided to the commissioner of revenue in 2019 and thereafter.new text end

Sec. 4.

Subd. 14.

Agricultural homesteads; special provisions.

(a) Real estate of less than ten acres that is the homestead of its owner must be classified as class 2a under section 273.13, subdivision 23, paragraph (a), if:

(1) the parcel on which the house is located is contiguous on at least two sides to (i) agricultural land, (ii) land owned or administered by the United States Fish and Wildlife Service, or (iii) land administered by the Department of Natural Resources on which in lieu taxes are paid under sections 477A.11 to 477A.14;

(2) its owner also owns a noncontiguous parcel of agricultural land that is at least 20 acres;

(3) the noncontiguous land is located not farther than four townships or cities, or a combination of townships or cities from the homestead; and

(4) the agricultural use value of the noncontiguous land and farm buildings is equal to at least 50 percent of the market value of the house, garage, and one acre of land.

Homesteads initially classified as class 2a under the provisions of this paragraph shall remain classified as class 2a, irrespective of subsequent changes in the use of adjoining properties, as long as the homestead remains under the same ownership, the owner owns a noncontiguous parcel of agricultural land that is at least 20 acres, and the agricultural use value qualifies under clause (4). Homestead classification under this paragraph is limited to property that qualified under this paragraph for the 1998 assessment.

(b)(i) Agricultural property shall be classified as the owner's homestead, to the same extent as other agricultural homestead property, if all of the following criteria are met:

(1) the agricultural property consists of at least 40 acres including undivided government lots and correctional 40's;

(2) the owner, the owner's spouse, or a grandchild, child, sibling, or parent of the owner or of the owner's spouse, is actively farming the agricultural property, either on the person's own behalf as an individual or on behalf of a partnership operating a family farm, family farm corporation, joint family farm venture, or limited liability company of which the person is a partner, shareholder, or member;

(3) both the owner of the agricultural property and the person who is actively farming the agricultural property under clause (2), are Minnesota residents;

(4) neither the owner nor the spouse of the owner claims another agricultural homestead in Minnesota; and

(5) neither the owner nor the person actively farming the agricultural property lives farther than four townships or cities, or a combination of four townships or cities, from the agricultural property, except that if the owner or the owner's spouse is required to live in employer-provided housing, the owner or owner's spouse, whichever is actively farming the agricultural property, may live more than four townships or cities, or combination of four townships or cities from the agricultural property.

The relationship under this paragraph may be either by blood or marriage.

(ii) Agricultural property held by a trustee under a trust is eligible for agricultural homestead classification under this paragraph if the qualifications in clause (i) are met, except that "owner" means the grantor of the trust.

(iii) Property containing the residence of an owner who owns qualified property under clause (i) shall be classified as part of the owner's agricultural homestead, if that property is also used for noncommercial storage or drying of agricultural crops.

(iv) As used in this paragraph, "agricultural property" means class 2a property and any class 2b property that is contiguous to and under the same ownership as the class 2a property.

(c) Noncontiguous land shall be included as part of a homestead under section 273.13, subdivision 23, paragraph (a), only if the homestead is classified as class 2a and the detached land is located in the same township or city, or not farther than four townships or cities or combination thereof from the homestead. Any taxpayer of these noncontiguous lands must notify the county assessor that the noncontiguous land is part of the taxpayer's homestead, and, if the homestead is located in another county, the taxpayer must also notify the assessor of the other county.

(d) Agricultural land used for purposes of a homestead and actively farmed by a person holding a vested remainder interest in it must be classified as a homestead under section 273.13, subdivision 23, paragraph (a). If agricultural land is classified class 2a, any other dwellings on the land used for purposes of a homestead by persons holding vested remainder interests who are actively engaged in farming the property, and up to one acre of the land surrounding each homestead and reasonably necessary for the use of the dwelling as a home, must also be assessed class 2a.

(1) the property owner abandoned the homestead dwelling located on the agricultural homestead as a result of the April 1997 floods;

(2) the property is located in the county of Polk, Clay, Kittson, Marshall, Norman, or Wilkin;

(3) the agricultural land and buildings remain under the same ownership for the current assessment year as existed for the 1997 assessment year and continue to be used for agricultural purposes;

(4) the dwelling occupied by the owner is located in Minnesota and is within 30 miles of one of the parcels of agricultural land that is owned by the taxpayer; and

(5) the owner notifies the county assessor that the relocation was due to the 1997 floods, and the owner furnishes the assessor any information deemed necessary by the assessor in verifying the change in dwelling. Further notifications to the assessor are not required if the property continues to meet all the requirements in this paragraph and any dwellings on the agricultural land remain uninhabited.

(1) the property owner abandoned the homestead dwelling located on the agricultural homestead as a result of damage caused by a March 29, 1998, tornado;

(2) the property is located in the county of Blue Earth, Brown, Cottonwood, LeSueur, Nicollet, Nobles, or Rice;

(3) the agricultural land and buildings remain under the same ownership for the current assessment year as existed for the 1998 assessment year;

(4) the dwelling occupied by the owner is located in this state and is within 50 miles of one of the parcels of agricultural land that is owned by the taxpayer; and

(5) the owner notifies the county assessor that the relocation was due to a March 29, 1998, tornado, and the owner furnishes the assessor any information deemed necessary by the assessor in verifying the change in homestead dwelling. For taxes payable in 1999, the owner must notify the assessor by December 1, 1998. Further notifications to the assessor are not required if the property continues to meet all the requirements in this paragraph and any dwellings on the agricultural land remain uninhabited.

(g) Agricultural property of a family farm corporation, joint family farm venture, family farm limited liability company, or partnership operating a family farm as described under subdivision 8 shall be classified homestead, to the same extent as other agricultural homestead property, if all of the following criteria are met:

(1) the property consists of at least 40 acres including undivided government lots and correctional 40's;

(2) a shareholder, member, or partner of that entity is actively farming the agricultural property;

(3) that shareholder, member, or partner who is actively farming the agricultural property is a Minnesota resident;

(4) neither that shareholder, member, or partner, nor the spouse of that shareholder, member, or partner claims another agricultural homestead in Minnesota; and

(5) that shareholder, member, or partner does not live farther than four townships or cities, or a combination of four townships or cities, from the agricultural property.

Homestead treatment applies under this paragraph for property leased to a family farm corporation, joint farm venture, limited liability company, or partnership operating a family farm if legal title to the property is in the name of an individual who is a member, shareholder, or partner in the entity.

(h) To be eligible for the special agricultural homestead under this subdivision, an initial full application must be submitted to the county assessor where the property is located. Owners and the persons who are actively farming the property shall be required to complete only a one-page abbreviated version of the application in each subsequent year provided that none of the following items have changed since the initial application:

(2) the owners and the persons actively farming the property continue to live within the four townships or city criteria and are Minnesota residents;

(3) the same operator of the agricultural property is listed with the Farm Service Agency;

(4) a Schedule F or equivalent income tax form was filed for the most recent year;

(5) the property's acreage is unchanged; and

(6) none of the property's acres have been enrolled in a federal or state farm program since the initial application.

The owners and any persons who are actively farming the property must include the appropriate Social Security numbersnew text begin or individual tax identification numbersnew text end, and sign and date the application. If any of the specified information has changed since the full application was filed, the owner must notify the assessor, and must complete a new application to determine if the property continues to qualify for the special agricultural homestead. The commissioner of revenue shall prepare a standard reapplication form for use by the assessors.

(1) the property owner abandoned the homestead dwelling located on the agricultural homestead as a result of damage caused by the August 2007 floods;

(2) the property is located in the county of Dodge, Fillmore, Houston, Olmsted, Steele, Wabasha, or Winona;

(3) the agricultural land and buildings remain under the same ownership for the current assessment year as existed for the 2007 assessment year;

(4) the dwelling occupied by the owner is located in this state and is within 50 miles of one of the parcels of agricultural land that is owned by the taxpayer; and

(5) the owner notifies the county assessor that the relocation was due to the August 2007 floods, and the owner furnishes the assessor any information deemed necessary by the assessor in verifying the change in homestead dwelling. For taxes payable in 2009, the owner must notify the assessor by December 1, 2008. Further notifications to the assessor are not required if the property continues to meet all the requirements in this paragraph and any dwellings on the agricultural land remain uninhabited.

(1) the property owner abandoned the homestead dwelling located on the agricultural homestead as a result of the March 2009 floods;

(2) the property is located in the county of Marshall;

(3) the agricultural land and buildings remain under the same ownership for the current assessment year as existed for the 2008 assessment year and continue to be used for agricultural purposes;

(4) the dwelling occupied by the owner is located in Minnesota and is within 50 miles of one of the parcels of agricultural land that is owned by the taxpayer; and

(5) the owner notifies the county assessor that the relocation was due to the 2009 floods, and the owner furnishes the assessor any information deemed necessary by the assessor in verifying the change in dwelling. Further notifications to the assessor are not required if the property continues to meet all the requirements in this paragraph and any dwellings on the agricultural land remain uninhabited.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for applications for homestead filed in 2018 and thereafter.new text end

Sec. 5.

Subdivision 1.

Private or nonpublic data.

The following data are private or nonpublic data as defined in section 13.02, subdivisions 9 and 12, when they are submitted to a county or local assessor under section 273.124, 273.13, or another section, to support a claim for the property tax homestead classification under section 273.13, or other property tax classification or benefit:

(1) Social Security numbers;

new text begin(2) individual tax identification numbers;new text end

deleted text begin(2)deleted text endnew text begin (3)new text end copies of state or federal income tax returns; and

new text beginEFFECTIVE DATE.new text end

Sec. 6.

Subd. 2.

Class 1b homestead declaration 2009 and thereafter.

(a) Any property owner seeking classification and assessment of the owner's homestead as class 1b property pursuant to section 273.13, subdivision 22, paragraph (b), after October 1, 2008, shall file with the county assessor a class 1b homestead declaration, on a form prescribed by the commissioner of revenue. The declaration must contain the following information:

(1) the information necessary to verify that, on or before June 30 of the filing year, the property owner or the owner's spouse satisfies the requirements of section 273.13, subdivision 22, paragraph (b), for class 1b classification; and

(2) any additional information prescribed by the commissioner.

(b) The declaration must be filed on or before October 1 to be effective for property taxes payable during the succeeding calendar year. The Social Security numbersnew text begin, individual tax identification numbers,new text end and income and medical information received from the property owner pursuant to this subdivision are private data on individuals as defined in section 13.02. If approved by the assessor, the declaration remains in effect until the property no longer qualifies under section 273.13, subdivision 22, paragraph (b). Failure to notify the assessor within 30 days that the property no longer qualifies under that paragraph because of a sale, change in occupancy, or change in the status or condition of an occupant shall result in the penalty provided in section 273.124, subdivision 13b, computed on the basis of the class 1b benefits for the property, and the property shall lose its current class 1b classification.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for applications for homestead filed in 2018 and thereafter.new text end

Sec. 7.

Subdivision 1.

Program qualifications.

The qualifications for the senior citizens' property tax deferral program are as follows:

(1) the property must be owned and occupied as a homestead by a person 65 years of age or older. In the case of a married couple, at least one of the spouses must be at least 65 years old at the time the first property tax deferral is granted, regardless of whether the property is titled in the name of one spouse or both spouses, or titled in another way that permits the property to have homestead status, and the other spouse must be at least 62 years of age;

(2) the total household income of the qualifying homeowners, as defined in section 290A.03, subdivision 5, for the calendar year preceding the year of the initial application may not exceed $60,000;

(3) the homestead must have been owned and occupied as the homestead of at least one of the qualifying homeowners for at least deleted text begin15deleted text endnew text begin fivenew text end years prior to the year the initial application is filed;

(4) there are no state or federal tax liens or judgment liens on the homesteaded property;

(5) there are no mortgages or other liens on the property that secure future advances, except for those subject to credit limits that result in compliance with clause (6); and

(6) the total unpaid balances of debts secured by mortgages and other liens on the property, including unpaid and delinquent special assessments and interest and any delinquent property taxes, penalties, and interest, but not including property taxes payable during the year, does not exceed 75 percent of the assessor's estimated market value for the year.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for applications for deferral of taxes payable in 2019 and thereafter.new text end

Sec. 8.

Subdivision 1.

Initial application.

(a) A taxpayer meeting the program qualifications under section 290B.03 may apply to the commissioner of revenue for the deferral of taxes. Applications are due on or before deleted text beginJulydeleted text endnew text begin Novembernew text end 1 for deferral of any of the following year's property taxes. A taxpayer may apply in the year in which the taxpayer becomes 65 years old, provided that no deferral of property taxes will be made until the calendar year after the taxpayer becomes 65 years old. The application, which shall be prescribed by the commissioner of revenue, shall include the following items and any other information which the commissioner deems necessary:

(1) the name, address, and Social Security number of the owner or owners;

(2) a copy of the property tax statement for the current payable year for the homesteaded property;

(3) the initial year of ownership and occupancy as a homestead;

(4) the owner's household income for the previous calendar year; and

(5) information on any mortgage loans or other amounts secured by mortgages or other liens against the property, for which purpose the commissioner may require the applicant to provide a copy of the mortgage note, the mortgage, or a statement of the balance owing on the mortgage loan provided by the mortgage holder. The commissioner may require the appropriate documents in connection with obtaining and confirming information on unpaid amounts secured by other liens.

The application must state that program participation is voluntary. The application must also state that the deferred amount depends directly on the applicant's household income, and that program participation includes authorization for the annual deferred amount, the cumulative deferral and interest that appear on each year's notice prepared by the county under subdivision 6, is public data.

The application must state that program participants may claim the property tax refund based on the full amount of property taxes eligible for the refund, including any deferred amounts. The application must also state that property tax refunds will be used to offset any deferral and interest under this program, and that any other amounts subject to revenue recapture under section 270A.03, subdivision 7, will also be used to offset any deferral and interest under this program.

(b) As part of the initial application process, the commissioner may require the applicant to obtain at the applicant's own cost and submit:

(1) if the property is registered property under chapter 508 or 508A, a copy of the original certificate of title in the possession of the county registrar of titles (sometimes referred to as "condition of register"); or

(2) if the property is abstract property, a report prepared by a licensed abstracter showing the last deed and any unsatisfied mortgages, liens, judgments, and state and federal tax lien notices which were recorded on or after the date of that last deed with respect to the property or to the applicant.

The certificate or report under clauses (1) and (2) need not include references to any documents filed or recorded more than 40 years prior to the date of the certification or report. The certification or report must be as of a date not more than 30 days prior to submission of the application.

The commissioner may also require the county recorder or county registrar of the county where the property is located to provide copies of recorded documents related to the applicant or the property, for which the recorder or registrar shall not charge a fee. The commissioner may use any information available to determine or verify eligibility under this section. The household income from the application is private data on individuals as defined in section 13.02, subdivision 12.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for applications for deferral of taxes payable in 2019 and thereafter.new text end

ARTICLE 7

SUSTAINABLE FOREST INCENTIVE ACT PRIVATE LANDS TIMBER HARVEST CREDIT

new text beginSubdivision 1.new text end

new text beginEligibility.new text end

new text beginAn individual, estate, or trust that is a fee title owner of at least 20 acres in the state may apply for a credit under this section for timber harvested and sold to a timber mill located in the state. No more than one owner is entitled to a payment under this section with respect to any tract, parcel, or piece of land that has been assigned the same parcel identification number. When eligible land is owned by two or more persons, the owners must determine between them which person is eligible to claim the credit provided under this section.new text end

new text beginSubd. 2.new text end

new text beginApplication.new text end

new text begin(a) An eligible owner may apply to the commissioner of natural resources to confirm eligibility and to verify the availability of funds before proceeding with a timber sale.new text end

new text begin(b) To receive a credit under this section, an eligible owner must harvest and sell timber from the owner's land located in the state and submit an application to the commissioner of natural resources that includes:new text end

new text begin(1) the name of the eligible owner and the owner's mailing address; andnew text end

new text begin(2) a receipt for the timber sold, according to paragraph (c).new text end

new text begin(c) The receipt required under paragraph (b) must be from a timber mill located in the state, be dated on or after July 1, 2018, but no later than December 31, 2020, and must include:new text end

new text begin(1) the name of the eligible owner;new text end

new text begin(2) a legal description of the land from which the timber was harvested; andnew text end

new text begin(3) the number of cords sold.new text end

new text beginSubd. 3.new text end

new text beginCredit amount.new text end

new text beginThe commissioner of natural resources must authorize payment of a credit of $5 per cord of timber sold for timber sales verified by application and receipt according to subdivision 2. The maximum payment to an eligible owner under this section is $5,000.new text end

new text beginSubd. 4.new text end

new text beginPayment.new text end

new text beginThe commissioner of natural resources must administer and issue payment of each credit authorized under subdivision 3 to the extent money is available for that purpose. When credits are authorized, but insufficient funds remain to satisfy full payment of the credits, the commissioner must pay the credits pro rata until all funds are expended. The commissioner of natural resources must pay credits quarterly.new text end

new text beginSubd. 5.new text end

new text beginAppropriation.new text end

new text begin$8,720,000 in fiscal year 2019 is appropriated from the general fund to the commissioner of natural resources for purposes of this section. Of this amount, $8,000,000 is for payment of credits to eligible owners and $720,000 is for administration of this section by the commissioner of natural resources. This appropriation is available until June 30, 2021.new text end

ARTICLE 8

NEEDED CORRECTIONS TO 2017 TAX BILL

Section 1.

Subdivision 1.

Levy amount.

The state general levy is levied against commercial-industrial property and seasonal residential recreational property, as defined in this section. The state general levy new text beginbase amount new text endfor commercial-industrial property is $784,590,000 for taxes payable in 2018 deleted text beginand thereafterdeleted text end. The state general levy new text beginbase amount new text endfor seasonal-recreational property is $44,190,000 for taxes payable in 2018 deleted text beginand thereafterdeleted text end. new text beginFor taxes payable in subsequent years, the levy base amount for commercial-industrial property and seasonal-recreational property is increased each year by multiplying the levy base amount for the prior year by the sum of one plus the rate of increase, if any, in the implicit price deflator for government consumption expenditures and gross investment for state and local governments prepared by the Bureau of Economic Analysts of the United States Department of Commerce for the 12-month period ending March 31 of the year prior to the year the taxes are payable. new text endThe tax under this section is not treated as a local tax rate under section 469.177 and is not the levy of a governmental unit under chapters 276A and 473F.

The commissioner shall increase or decrease the preliminary or final rate for a year as necessary to account for errors and tax base changes that affected a preliminary or final rate for either of the two preceding years. Adjustments are allowed to the extent that the necessary information is available to the commissioner at the time the rates for a year must be certified, and for the following reasons:

(1) an erroneous report of taxable value by a local official;

(2) an erroneous calculation by the commissioner; and

(3) an increase or decrease in taxable value for commercial-industrial or seasonal residential recreational property reported on the abstracts of tax lists submitted under section 275.29 that was not reported on the abstracts of assessment submitted under section 270C.89 for the same year.

The commissioner may, but need not, make adjustments if the total difference in the tax levied for the year would be less than $100,000.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxes payable in 2019 and thereafter.new text end

Sec. 2.

Subdivision 1.

Return required.

In the case of a decedent who has an interest in property with a situs in Minnesota, the personal representative must submit a Minnesota estate tax return to the commissioner, on a form prescribed by the commissioner, if:

(1) a federal estate tax return is required to be filed; or

(2) the sum of the federal gross estate and federal adjusted taxable gifts, as defined in section 2001(b) of the Internal Revenue Code, made within three years of the date of the decedent's death exceeds deleted text begin$1,200,000 for estates of decedents dying in 2014; $1,400,000 for estates of decedents dying in 2015; $1,600,000 for estates of decedents dying in 2016;deleted text end$2,100,000 for estates of decedents dying in 2017deleted text begin;deleted text endnew text begin ornew text end $2,400,000 for estates of decedents dying in 2018deleted text begin; $2,700,000 for estates of decedents dying in 2019; and $3,000,000 for estates of decedents dying in 2020deleted text end and thereafter.

The return must contain a computation of the Minnesota estate tax due. The return must be signed by the personal representative.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective the day following final enactment.new text end

new text beginEFFECTIVE DATE.new text end

Sec. 4.

Subd. 13a.

Premium cigar.

"Premium cigar" means any cigar that is hand-constructednew text beginand hand-rollednew text end, has a wrapper that is made entirely from whole tobacco leaf, has a filler and binder that is made entirely of tobacco, except for adhesives or other materials used to maintain size, texture, or flavor, and has a wholesale price of no less than $2.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective July 1, 2018.new text end

Sec. 5.

Minnesota Statutes 2016, section 297F.05, is amended by adding a subdivision to read:

new text beginSubd. 1b.new text end

new text beginAnnual indexing.new text end

new text begin(a) Each year the commissioner shall adjust the tax rates under subdivision 1, including any adjustment made in prior years under this subdivision, by multiplying the mill rates for the current calendar year by an adjustment factor and rounding the result to the nearest mill. The adjustment factor equals the in-lieu sales tax rate that applies to the following calendar year divided by the in-lieu sales tax rate for the current calendar year. For purposes of this subdivision, "in-lieu sales tax rate" means the tax rate established under section 297F.25, subdivision 1. For purposes of the calculations under this subdivision to be made in any year in which an increase in the federal or state excise tax on cigarettes is implemented, the commissioner shall exclude from the calculated average price for the current year an amount equal to any increase in the state or federal excise tax rate.new text end

new text begin(b) The commissioner shall publish the resulting rate by November 1 and the rate applies to sales made on or after January 1 of the following year.new text end

new text begin(c) The determination of the commissioner under this subdivision is not a rule and is not subject to the Administrative Procedure Act in chapter 14.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective the day following final enactment and applies beginning with rates calculated for calendar year 2019.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for cigars for which the consumer has acquired title to, or possession of, after June 30, 2018.new text end

APPENDIX

Repealed Minnesota Statutes: 18-4983

289A.50 CLAIMS FOR REFUNDS.

Subd. 10.

Limitation on refund.

(a) If an addition to federal taxable income under section 290.0131, subdivision 2, is judicially determined to discriminate against interstate commerce with respect to obligations of a certain character or type, the legislature intends that the discrimination be remedied by adding to federal taxable income interest on comparable obligations of Minnesota governmental units and Indian tribes. For purposes of this subdivision, "comparable obligation" means obligations of the character or type that the court found to be unconstitutionally favored by section 290.0131, subdivision 2, whether based on the security for payment, use of the proceeds, or any other factor identified as determinative by the court.

(b) This subdivision applies beginning with the taxable years that begin during the calendar year in which the court's decision is final. Other remedies apply for previous taxable years.

Subd. 14.

Fines, fees, and penalties.

290.10 NONDEDUCTIBLE ITEMS.

Subd. 2.

Fines, fees, and penalties.

(a) Except as provided in this subdivision, no deduction from taxable income for a trade or business expense under section 162(a) of the Internal Revenue Code shall be allowed for any amount paid or incurred, whether by suit, agreement, or otherwise, to, or at the direction of, a government or entity described in paragraph (d) in relation to the violation of any law or the investigation or inquiry by such government or entity into the potential violation of any law.

(b) Exception for amounts constituting restitution or paid to come into compliance with the law. Paragraph (a) does not apply to any amount which:

(1) the taxpayer establishes:

(i) constitutes restitution, including remediation of property for damage or harm caused by or which may be caused by the violation of any law or the potential violation of any law; or

(ii) is paid to come into compliance with any law which was violated or involved in the investigation or inquiry; and

(2) is identified as restitution or as an amount paid to come into compliance with the law, as the case may be, in the court order or settlement agreement.

This paragraph does not apply to any amount paid or incurred as reimbursement to the government or entity for the costs of any investigation or litigation.

(c) Paragraph (a) does not apply to any amount paid or incurred by order of a court in a suit in which no government or entity described in paragraph (d) is a party.

(d) An entity is described in this paragraph if it is:

(1) a nongovernmental entity which exercises self-regulatory powers, including imposing sanctions, in connection with a qualified board or exchange, as defined in section 1256(g)(7) of the Internal Revenue Code, or;

(2) to the extent provided in federal regulations, a nongovernmental entity which exercises self-regulatory powers, including imposing sanctions, as part of performing an essential governmental function.

(e) Paragraph (a) does not apply to any amount paid or incurred as taxes due.

297F.185 REVOCATION OF SALES AND USE TAX PERMITS.

(a) If a retailer purchases for resale from an unlicensed seller more than 20,000 cigarettes or $500 or more worth of tobacco products, the commissioner may revoke the person's sales and use tax permit as provided in section 270C.722.

(b) The commissioner may revoke a retailer's sales or use permit as provided in section 270C.722 if the retailer, directly or indirectly, purchases for resale cigarettes without the proper stamp affixed.